Due to interventions by US politicians in the market, it was once again remembered as an alternative asset and rose more than 24% in a month. However, the negative seasonality of stock markets in September and central banks fighting inflation are not a favorable combination for a new wave of autumn optimism.
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The same problems and one more
The memorandum of understanding signed by the US and Iran in June has long been forgotten, and at the end of August both sides resumed military attacks. Nevertheless, oil flows through the Strait of Hormuz, albeit slowly, so its price had decreased in mid-month but rose again to 91 US dollars by the end of the month.
In the field of artificial intelligence, good financial results from Nvidia and a forecast that the company’s revenue will grow by 70% in 2028, rather than 45% as the market expected (although the company’s debts and payment deferrals are also increasing), injected mild optimism. After this announcement, the company’s shares rose about 7% and boosted optimism across the information technology sector.
US Treasury Secretary Scott Bessent tried to stir the calm summer markets. At the end of July, he carried out an intervention to strengthen the Japanese yen together with Japan, and at the end of August announced preparations to double the purchase of long-term US securities. In the context of these interventions, markets began to view traditional currencies and the US dollar more cautiously, while alternatives – gold and crypto assets – rose in value. For example, the price of Bitcoin in euros rose about 24% over the month, and gold about 9%.
Under conditions of lower summer liquidity, these factors were enough for overall market optimism – measured in euros, global stocks rose 1.7% over the month. European government bond interest rates increased slightly, but the overall euro bond index changed little over the month.
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At the end of the month, the future prospects of the markets were shaped by a statement from US Federal Reserve Chairman Kevin Warsh. It mentioned that although recent US inflation data are somewhat better, this is not enough to control inflation expectations, so the central bank still has a lot of work ahead. Thus, the probability that US monetary policy interest rates will be raised at the September meeting increased from 35 to 65%. Meanwhile, in the eurozone, another interest rate hike is almost certainly expected next week. Accordingly, both 3-month and 6-month EURIBOR reached new records in August, rising to 2.59 and 2.77%, respectively.
A possible increase in monetary policy interest rates and tightening of financing conditions may dampen stock market optimism. Especially since September is historically the least favorable month – over the past 100 years, the US S&P index has on average fallen 0.99% during this month.
Pension fund results
The value of “Luminor” pension funds grew in August along with market trends. Preliminary data show that the value of conservative “Luminor” pension funds increased up to 1%, and equity funds by about 3%. Among other funds, the equity fund “Luminor Sustainable Future Index” stood out, whose value rose about 4% over the month.
Long-term fund results also remain strong. For example, the weighted average return of all Tier II lifecycle funds since their establishment in 2019 exceeds 10%.
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