August gave us a timely reminder of the ups and downs that come with investing!
While global markets fell at the start of the month, by mid-August, they had made a strong comeback. It’s important to remember that market volatility is a normal part of investing. August’s recovery is a great reminder of why it's important to stay the course and make sure your fund type aligns with your risk tolerance and investment timeframe.
Global Markets
August started off with a sharp sell-off across global financial markets, triggered by weak economic data in the US and the unwind of Japan’s carry trade*. The Sahm rule, which signals recession risk, was triggered as US unemployment ticked up slightly to 4.3%, while the Bank of Japan unexpectedly hiked rates. The fear of a ‘hard landing’ had re-emerged amongst investors, and there were even talks of an emergency rate cut being needed.
However, by mid-August, markets bounced back following stronger-than-expected retail sales data and resilient corporate earnings, which both eased recession fears. Approximately 80% of S&P 500 companies reported earnings that beat expectations, helping the index close the month up 2.4% (local currency). Globally, equities followed suit, with the MSCI All Countries World Index ending the month up 1.6% (NZD hedged).
New Zealand Markets
In New Zealand, the Reserve Bank of New Zealand (RBNZ) kicked off its first rate-cutting cycle in several years, responding to slower domestic economic growth. While the NZX50 delivered a modest 0.3% gain for the month, key stocks like Fisher & Paykel Healthcare surged 10% after raising earnings guidance. Business confidence in New Zealand showed significant improvement, with the ANZ Business Confidence Survey soaring by 23 points to +51 in August; the highest level in a decade. This sharp rise suggests businesses are increasingly optimistic about the future.
Aurora Fund Performance
Keep up to date with the Aurora funds’ monthly performance by viewing our Factsheets here.
*Carry trade involves borrowing in a low-interest-rate currency, like the Japanese Yen, to invest in higher-yielding assets. When the interest rate differential shrinks, it can lead to market instability, as investors pull out of the previously higher-yielding assets.
DISCLAIMER
This information is provided in a general nature only and should not be construed as or relied on as financial advice. This is not a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any investment decisions.
Past performance is not a reliable indicator of future performance. The value of your investment may go up and down.