The first signs are visible that higher energy prices seem to be working their way down the production chain. As a result, pressure on central banks remains high to fight inflation through interest rate hikes. The likelihood of economies ending up in recession as a result is increasing. Fixed-income securities were (thus) quoted lower due to increased interest rates and equities also experienced negative returns for the month. The US dollar strengthened further against the euro to a rate of 1 (a rate at which both currencies are equally strong).
Shares
After recovering in July, equity markets fell again in August. The MSCI All Countries World Index lost 2.8%. Europe (-4.9%) compared poorly with other continents: North America (-2.6%) and Japan (-1.2%). Emerging markets even managed a positive return(+1.8%). Latin America was the region with the best result here: +4.2%. Increased interest rates further fuelled investor fears of recession. Growth stocks suffered more than value stocks, and this was reflected in the returns (-3.3% and -1.4% respectively). Among sectors, Energy stood out as the best performer with a positive of return of 3.7%.
Bonds
The decline in interest rates in the bond markets was short-lived; in August interest rates rose again. German 10-year rates rose 0.72% to 1.54%. In the U.S., 10-year interest rates again recorded above 3% (3.19%); up 0.54%. The risk premium for less risky corporate bonds rose somewhat further than for more risky corporate bonds: 1.98% (+0.14%) and 5.62% (+0.03%) respectively.