Volatility in US and Asia, UK quiet

August is typically a quiet month in capital markets. However, the slight positive return for

UK equities in the month masks the large swings seen in some Asian and US markets that

occurred on some days in the month. Commentators provided erudite explanations for the

sharp moves after they happened, although fewer were made beforehand.

In the UK the underlying corporate data was not much changed as there was little news

flow, so attention was drawn to macro issues. There was a good start to the month on this

front when interest rates were reduced but as this was expected there was little impact on

the market.

The number of sectors that fell over the month was matched by the number that rose. The

best performers were Health Care and Consumer Staples with the other gainers only edging

into positive territory. On the downside Energy, Materials and Information Technology

recorded the largest declines as might be expected of dollar earners in a period when

sterling appreciated.

On a slightly longer time scale, since the start of the year, UK equities have so far delivered

a robust performance with some sectors ahead by over a fifth and none showing negative

returns.

On an even longer time scale of 5 and 10 years it is evident that UK equities with a bias to

value have delivered better returns than the market after a long period when they

underperformed.

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