Market Commentary

Global markets kicked off the month in freefall after Japan’s interest rate hike and subsequent surge in the yen spooked investors, particularly those with skin in the carry-trade game. The sour mood was compounded by revived fears that the US economy was recession-bound. Volatility skyrocketed, with the VIX – aka the “fear index” – soaring by its most in a single day to its third highest peak ever.

In the end, the turmoil proved sharp but short as Japan’s central bank almost bent over backwards to placate markets and doomsayers were silenced by a slew of robust economic indicators. Hardy US consumers continued to spend freely, while inflation dropped below 3.0% in July for the first time since early 2021. The US Federal Reserve all but promised an interest rate cut as early as September, which further buoyed spirits.

In a reversal of recent fortunes, the tech sector underperformed the broader market as stratospheric valuations looked increasingly questionable. While Nvidia’s highly-scrutinised quarterly earnings technically beat expectations, investors evidently expected even more for their money and the chipmaker endured a steady sell-off.

August was a rollercoaster for markets at home, too. Local stocks sold off in sympathy with their global peers early in the month, before staging a rousing comeback after the RBNZ answered more than a few prayers by cutting interest rates and signalling more to come. However, a grim earnings season delivered a reality check on the current operating environment, which prompted another pullback.

Australian markets managed to claw back all their losses from an early stomach-churning sell-off but failed to sustain the rally after an uninspiring inflation read.

Against this backdrop, the S&P 500 finished August up by 2.3%, while the tech-focused Nasdaq gained a slimmer 0.7%. Meanwhile, the NZX 50 (+0.1%), ASX 200 (-0.01%), and the UK’s FTSE 100 (+0.1%) all finished the month almost exactly where they started it.

GBP and AUD / NZD exchange rate change from 31 July 2024 to 31 August 2024:

GBP and AUD / NZD exchange rate change from 31 August 2023 to 31 August 2024: