lc
The FTSE 100 ended July at 8,367 and closed on 30th August at 8,376. A quiet month?? Absolutely not.
As followers of TPP, you probably watch the market closer than most investors. If you do, you would have seen the sharpest one-day sell-off in Asia since Black Monday in 1987 and the rest of the world’s equity markets falling with it.
Here is what happened:
August was an eventful month for investors. Any hopes of a late summer lull were quickly dashed at the beginning of the month after the publication of disappointing US economic data, together with an interest rate hike by the Bank of Japan, sparked a sharp sell-off across global equity markets.
The ISM manufacturing print that came in well below expectation (46.8 vs 48.8), and a weak July jobs report which showed one of the smallest payrolls increase in over three years, and this fuelled fears about a US recession.
Moreover, on the back of higher labour participation, the unemployment rate increased slightly to 4.3%, enough to trigger the Sahm Rule indicator, an empirical observation which predicts a recession when the three-month moving average of the unemployment rate exceeds its lowest level from the prior 12 months.
At the same time, the Bank of Japan’s decision to increase its policy rate by 25 basis points (bps)and Governor Ueda’s hawkish tone led to an abrupt unwinding of carry trade positions, which had relied on cheap Japanese yen borrowing costs to buy other higher yielding assets.
On the back of this Japan was hit hardest with the Nikkei 225 index crashing 12% on 5 August, its biggest daily drop since Black Monday in 1987. The sell-off was exacerbated by a sharp rally in the Japanese yen which is believed to have triggered a scramble to close carry trades, selling the yen to buy other assets, which in turn forced traders to liquidate long positions in stocks.
Investors also took profit in other markets which had performed well over the last couple of months, and the Nasdaq dropped almost 6% over the course of three days!
Fortunately however, the crash didn’t follow through. After the initial spike in volatility, investors took comfort in the prospect of lower interest rates as well as a solid Q2 earnings season that showed few signs of an imminent economic slowdown. This allowed most markets to recover their losses by the end of the month.
As is often the case, the panic was overdone. The data that sparked the collapse just wasn’t that bad, it was just a bit unexpected. Yes, unemployment ticked up a touch, and payrolls were lower than expected but the problem comes once a sell-off begins. People panic, automated trading machines see the panic, add to it, and we get a fall well beyond anything we would expect from the actual data.
This was a good time to buy, and most trading strategies on TPP had a good month because of it. In the second half of the month the prospect of lower US interest rates helped equity markets rebound and developed market equities closed 2.7% higher over the month in dollar terms. Other interest rate sensitive asset classes, such as real estate, were also well supported and the Global REITs Index rose 6.2%.
Monthly figures for equities, bonds and currencies were as follows:
Globally, the S&P 500 continued to outperform, thanks to a broadening of earnings growth outside of the technology. This helped the S&P 500 deliver returns of 2.4% over the month. Asia ex-Japan and emerging market equities outperformed most of their western developed market counterparts, delivering returns of 2% and 1.8% respectively, as expectations for Fed rate cuts weighed on the dollar (DXY Index), which dropped 2.3% over the month.
Europe underperformed the US in local currency terms, returning 1.4%. Although the boost to the French service sector from the Olympics meant the eurozone composite PMI (Purchasing Managers’ Index) came in higher than expected, the overall economic backdrop remained weak and earnings from cyclical companies disappointed.
TPP Performance
The data provided below is past performance and is no guarantee of future performance.
In GBP terms, global equities added 0.3% and the FTSE 100 gained 1%. With this in mind, how did TPP’s strategies perform in August? As you would expect, most outperformed.
A couple of our long/short strategies took advantage of the moves in both directions with the standouts being the two Europeans: European Stock Basket and Stock Exposure, with the former making a whopping 10.1% and the latter 6.3% on the month.
These were great performances but the top 5 strategies we’re going to focus on are getting the headlines as they have also been performing well all year.
As usual, a TPP favourite, Cambridge Futures had another good month. This trading strategy which is either long (on the buy side) or flat the FTSE, added another 3.8% in August on top of the 11.9% it was already up in 2024.
Cambridge Futures was up 15.7% year to date as of the close on August 30th. This is an investment portfolio that just keeps on giving.
Our other FTSE strategy is also doing well this year, in fact, even better. The FTSE Tech Entry trade is now positive by 16.3% this year, compared to the FTSE 100 itself which up less than half that.
With this said, it is the new fund of funds portfolios which have really caught our eye. These are single stock equity portfolios built using information gathered about the top equity positions from the largest investment and hedge funds around the world.
These have had a good August, above and beyond global or US equities, and continue to do well in 2024. Here is a table of our best performers at the moment:
We've recently launched a few new strategies on our platform to further diversify our offering, which we'll be announcing officially shortly. However, if you're interested in having an early look then head over to our website.
At TPP we have 3 tactics that we offer investors which we hope will assist them to build a portfolio that consistently beats their market benchmark. Recent statistics suggest that over 80% of wealth managers underperform simple market trackers, and in our opinion it isn't good enough.
With our leveraged trackers, long or flats, and active equity long/short strategies we want to provide investors with a better alternative.
TPP: The new way to invest.
