August 2013 Monthly Commentary - Please contact CurAlea Associates for a Daily Market Review.
August was a month of heightened risk aversion within the context of the relative calm that has pervaded most global asset markets in 2013. The combination of geopolitical tensions in Egypt and Syria, ongoing concerns over the tapering of the Federal Reserve’s asset purchases, the continued rise in US treasury interest rates, and the looming dual deadlines of a September US government shutdown and October debt default impacted global asset markets.
Almost all major developed market equity markets fell in August, led by a 3% fall in the S&P 500. There was fairly large dispersion across US sectors, with the worst performing sectors down 5% (Financials and Utilities) and the best performing sector flat on the month (Materials). The trend of large cap value outperforming growth since early 2012 reversed sharply in August. While Emerging Market equities were roughly flat in local terms and down 1.7% in USD, there was very wide dispersion here as well with the biggest losses in Indonesia (-10%), Philippines (-9.4%), and Thailand (-8.7%) and the biggest gains in Argentina (+12.3%), Korea (+2.6%) and China (+2.4%).
In currencies, the USD Index was up 0.8% in August, with gains against all major developed market currencies except the British Pound, which strengthened by 2% versus the USD. The dollar was also stronger against most emerging market currencies with the exception of the Korean Won, Taiwan Dollar, and Chinese Yuan; the weakest emerging market currencies were the Indian Rupee (-9.1% and consistently hitting new record lows versus the USD during August), Indonesian Rupiah (-9%), Turkish Lira (-5.1%), and Mexican Peso (-4.9%).
US Treasuries moved lower again in August, with continued yield curve steepening. 10 year rates closed the month at 2.78%, up from 2.58% at July month end, but down from the 8/21 intra month high of 2.89%. Investment grade and high yield US credit spreads widened in August, while European sovereign spreads were largely unchanged with the exception of Portugal, which widened.
In commodities, the GSCI index closed up 3.4% in August, led by strength in Precious Metals (+7.9%), Energy (+4%), Livestock (+2.2%), Industrial Metals (+1.8%), and Agriculture (+0.4%). Within individual commodities, Silver led gains (+19.5%), followed by Soybeans (+12.5%), Platinum (+6.8%), Gold (+6.3%) and Brent Crude (+5.8%); Coffee was the weakest performer (-4%), followed by Sugar (-3.7%), Wheat (-3.5%), Cotton (-2%), and Corn (-1.2%).