August Market Commentary

Craig Hendry

Craig Hendry

Managing Director & Chartered Financial Planner

August started with a bang as the Bank of England’s Monetary Policy Committee (MPC) took the bold step of cutting interest rates to 0.25%. As well as cutting interest rates on weakening economic data, the MPC increased its Quantitative Easing (QE) programme to £435bn. Interestingly, QE will now include the purchase of £10bn of corporate bonds and not just Government bonds.

With interest rates at such a low level, there has been an increase in the amount of cash ISAs being transferred into Stocks & Shares ISAs in search of a greater return than the interest rates currently available.

The FTSE 100 finished the month up 0.85%. The mid-cap FTSE 250 has finally breached pre-referendum levels – perhaps a sign that the fall was an overreaction to the outcome. On a sad note, the High Street said goodbye to one of its former stalwarts as the last BHS store closed on 28 August.

In the US, there has been murmurs that a further interest rate rise could be on the way – and sooner than expected. The Federal Reserve meet on 20-21 September to decide their next course of action. It is unlikely that the UK will follow suit in the foreseeable future. Arguably, there is a greater chance we will see interest rates fall further in the UK.

Brent Crude has had a strong month up 7.72% on the back of speculation that the OPEC cartel will look to ease production levels, although the next official meeting is not until 30 November.

  • FTSE 100 – 6,781.51
  • GBP/USD – 1.3128
  • GBP/Euro – 1.1778
  • Brent Crude – $46.89
  • Gold – $1,308.97 (per oz)

As at 31 August 2016

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