Sept. 2016 || Newsletter

Investment Perspective
The main trends observed during a quiet month of August were the extension of the tightening of credit and emerging market debt spreads, the strong rebound of oil prices and for developed markets’ equities to remain range bound; the equities of emerging markets also continued to outperform on the back of positive inflows. In contrast, the US dollar proved to be quite volatile. Following a weak start to the month, the dollar rallied as expectations of higher US interest rates were boosted by comments from Fed Chair Janet Yellen and Vice Chairman Stanley Fischer at the end of the month.

On August 4th, the Bank of England’s governor, Mark Carney, more than fulfilled investors’ expectations by unleashing a stimulus package. As widely expected, the BOE cut interest rates by 25 basis points to a record-low 0.25 percent. It also announced a plan to buy 60 billion pounds of government bonds over six months and as much as 10 billion pounds of corporate bonds in the next 18 months, as well as a potential 100 billion-pound loan program for banks. The impact of these measures triggered a decrease of long-term Gilt yields, with a 40 basis points drop of 30-year yields to 1.22% by August 12th!

The long-awaited Jackson Hole speech by Fed Chair Yellen proved to be more hawkish than generally anticipated. Yellen said that the case to raise interest rates was getting stronger as tighter labour markets should eventually push inflation back to the central bank’s 2 percent goal. Vice Chairman Stanley Fischer then reinforced Yellen’s message by indicating that an increase was possible already in September. The dollar rallied on the back of these com-ments as it ended August at a parity of 1.116 against the euro, compared to a 1.135 level observed in the middle of the month.

Newsletter summary

  • The strong run of spanish government bonds
  • Investment Strategy
  • Portfolio Activity/News

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