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LCP Investment Summary - August 2018

Posted on 3 September, 2018 by Administrator

LCP Investment Summary - August 2018

Global equity markets rose 1.5% (in € terms) during August.

North American equities had a strong month, boosted by revised upwards Q2 GDP data and the strongest year-on-year growth in corporate profits in six years, helped by the new tax cuts. Investor concerns over the evolving global trade war abated for most of the month but resurfaced late on when President Trump announced an additional $200bn of tariffs on Chinese imports, threatened to withdraw from the World Trade Organisation (WTO), rejected the recent agreement with the EU on car imports and was also at loggerheads with Canada on the North American Free Trade Agreement (Nafta) after announcing ‘a beautiful, brand new US-Mexico trade deal’.

Eurozone equities fell over the month, with investors there concentrating more on issues like the growing trade war, the currency drama in Turkey and its possible contagion effect, and also the Italian government’s high debt levels.

Bonds

Longer-dated Eurozone bond prices rose 1.5% in August, with the yield on the AAA Eurozone 15+ Year Index falling to 0.85% by month end. The Euro Broad Sovereign 10+ Year Index fell by 0.8% with its yield rising to 1.75%.

Yields of AAA-rated bonds fell over August with economic data showing the region had slowed over Q2, with exports and business confidence seemingly affected by the trade war. With inflation also slightly weaker, the ECB will remain cautious as it unwinds its monetary stimulus programme. The situations in both Italy and Turkey did lead to some volatility and saw yields rising in Broad Sovereign indices.

Sample DB Scheme

The funding level of our sample DB scheme rose to 98.9%, as its assets rose by more than its liabilities (calculated using a MFS proxy) over the month.

Sample DC Schemes

Our three sample DC Strategies all rose in August as most asset classes rose over the month.

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