The major UK news in September was the Salzburg EU summit, which saw the UK PM become a victim of political whiplash. This affected the markets, but not entirely predictably. If you’ve been asleep in September, you’ll struggle to see the ‘surprise’ summit result in the financial charts.
The Trump saga was preoccupied with the Supreme Court last month. This doesn’t obviously translate into market sentiment, thank goodness.
Nonetheless, from a UK markets point of view, September had its own form of whiplash.
Taking just the UK, for instance, consider equities (FTSE-100) and sterling. FTSE-100 veered between 7550 and 7250, a swing of 4%. By contrast, the S&P-500 nudged between 289 and 295 – about half as much change in the month. Meanwhile, GBP:USD veered between 1.282 and 1.328, a swing of almost 4% as well.
The FTSE-100 and GBP:USD are correlated, of course. The USD is the ‘currency of the world’, and FTSE-100 companies mostly are global businesses, trading heavily in USD. So when the GBP falls, the FTSE-100 goes up – these are the same companies, and valuing them in USD makes in many ways more sense than valuing them in pounds.
But the total swing of the FTSE, measured in dollars, was over 5% in the month. And back again. This means any particular snapshot of returns feels very arbitrary indeed. Those of you who ignore month to month movements are definitely on the high ground here.
Anyway, be that as it may, as at the end of September FTSE was up just over 1%. Sterling itself rose too, about half as much. And, so it happens, so did the S&P.
Bonds, on the other hand, are heading down. With rate rises firmly on the agenda, the economy ‘booming’ (ish), now isn’t a very bonds-friendly time. Or at least that is my superficial read on the situation.