After months of investments tumbling in a downward trend, July seemed to mark a positive turning point for global markets. In fact, China was the only leading stock market to fall in value. This brief rebound had created speculation about whether or not stock markets were beginning to stabilise, or even recover. However, August reminded us all that we’re still firmly in the grips of a bear market.
For a few weeks in August an appealing picture was forming, as US companies had better than expected earnings and share prices grew in response. What changed? On 26 August, the Federal Reserve (the equivalent of the UK’s Bank of England) effectively announced they must continue to substantially raise interest rates to tackle inflation in the US. As a result, share prices in US companies fell.
It’s important to remember that on balance, all major stocks are still witnessing negative returns for 2022, and that bear markets aren’t permanent. Despite this recent economic dip, the gains in July have outweighed the losses in August for many investors.
Keep reading to find out how markets have performed this month.
What happened to the markets in August?
August saw many of the world’s stock markets tell a similar story of share prices rallying upwards before falling down again. Compared to some of the double digit swings we’ve seen this year, this smaller margin of market movement could be comforting to some investors.
In the US, the S&P 500 fell by 2.28% in August.
Source: Google
In the UK, the FTSE 250 fell by 4.16% in August.
Source: Google
Summary
In recent months the scale of volatility in global stock markets appears to be slowly reducing, giving investors optimism for further stability and perhaps even growth. The revived interest in US technology companies had temporarily increased share prices and created positive returns for investors.
This recovery is small in comparison to the year-to-date losses that investors in 2022 have seen. Undoubtedly, stock markets will need more time to fully recover from the three economic shocks: the war in Ukraine, the UK’s rising inflation rate, and China’s supply chain disruptions.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
