August market performance: Worst month for stocks so far this year

US -1.8%.
The US equity benchmark index, the S&P 500, was down 1.8% in August but remained a regional outperformer. Earlier in the month, growth and inflation indicators brought a hawkish shift in Fed expectations weighed on US equities. However, there are concerns of weakness in consumer spending later in the year as Fed’s tightening filters through to the economy. There are also some early signs of cracks in labor markets, but bad news has been good news lately as Fed is expected to stay on pause and this helped US stocks to recover some of their losses into the end of the month.

Europe -2.7%.
The European index, MSCI Europe, underperformed the US benchmark index in August as it closed down 2.7%. Economic concerns remained front-and-centre, with core inflation remaining sticky while economic slowdown, especially in Germany, continued to complicate the path ahead for the European Central Bank.  

Asia -5.1% and Emerging Markets -6.3%.
Asia and emerging markets were the underperformers in August, declining by over 5% and 6% respectively. Several headwinds underpinned, but most prominent were the bearish outcomes in China and Hong Kong with concerns over property sector and shadow banking. The start of the rate cut cycles in Latin American countries like Chile and Brazil could not provide much of a tailwind as Fed’s higher-for-longer message continued to limit the room for easing in emerging markets.

Energy sector led in the global market in terms of August performance once again, but with modest gains of 1.2% while all the other sectors were in the red. Gains in oil prices underpinned, driven by sustained supply tightness concerns. Healthcare was the second-best performing sector, posting a decline of 0.9%, while Communication Services were down over 1.5%.

Bonds outperformed equities in August, although overall performance was still in negative territory. This was again a reflection of the confusion over how much more central banks can hike rates from here, while a fresh rush of Treasury supply also underpinned. Corporate bonds, however, underperformed global Treasuries.