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LCP Investment Summary - August 2017

Posted on 1 September, 2017 by Administrator

LCP Investment Summary - August 2017

Global equities fell 0.5% in euro terms (but were up 0.4% in local currencies) during August, in what was a turbulent month for investors.  

Eurozone equities were down 0.4%, with investors initially reassured by both improving global and eurozone economic growth (which also helped push the euro higher). However markets fell sharply at different times in August over North Korean/US tensions and also following the Barcelona attacks, hitting a six month low near month-end. The continuing impact of the strong euro was also a negative for the many exporters in the region.

North American equities rose 0.4% in $ terms (and fell 0.5% in € terms) in August. Stronger than expected US GDP data released near month-end cheered investors after what had been an otherwise difficult month. Ongoing tensions between North Korea and the US, the Charlottesville rally and its fallout, more Trump sackings and the threat of a US government shutdown all helped to rattle investors over the course of the month.

Bonds

Longer-dated Eurozone bond prices rose 3.3% in August, with the yield on the AAA Eurozone 15+ Year Index falling to 0.98% by month end. The Euro Broad Sovereign 10+ Year Index rose 1.7%, with its yield falling to 1.64% at the end of month.

Longer-dated yields fell sharply as investors looked for safe-haven assets following the tensions between North Korea and the US, and also after the Barcelona attacks, which both overshadowed the continuing improvement in eurozone economic and inflation data. Also, some investors felt that the stronger euro may now lead to a delay, or a slowdown, to the end of the ECB’s ultra-easy monetary policy which has helped keep yields at very low levels since March 2015.

Sample DB Scheme

The funding level of our sample DB scheme fell to 96.0%, as its assets rose by less than its liabilities over the month (calculated using a MFS proxy).

Sample DC Schemes

The Medium Risk and Pension Purchase Strategies rose in August as a result of their high allocation to longer-term eurozone government bonds.

Market Performance to 31st August 2017

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