Late Summer heatwave
Global stocks continued their climb higher until the latter part of last week. The rise up until last Wednesday had shown remarkably steady gains in daily terms. When you put that together with gains over the last few weeks, equity returns have been very impressive. From Monday 5 August – the start of that day marked the nadir of the summer sell-off – the MSCI World Index gained more than 8% in US Dollar terms to last Wednesday 21 August. That is quite the turnaround from the panic that came before. Implied volatility has fallen sharply after the early August spike, and investors seem to have chased their fears away.
Who’s afraid of UK wage rises?
At the start of August, the Bank of England (BoE) cut interest rates for the first time in more than four years. The decision looks fairly straightforward on the face of it: CPI inflation was bang on the bank’s 2% target in May and June (though slightly above at 2.2% in July), and rates are economically restrictive. But Monetary Policy Committee (MPC) members only approved the cut by the narrowest of margins (five votes to four) and governor Andrew Bailey warned that further rate cuts were not a given.