Market Commentary August 2020

August was a strong month for growth assets with share market returns ranging from 2.5% to 8%. This is perplexing when we consider that COVID-19 cases globally are now over 25 million and the pandemic is not contained in some countries/regions. However, central banks globally continue their “whatever it takes” rhetoric with the US Federal Reserve de-prioritising its historical 2% inflation rate target in favour of a new “inflation averaging” framework that will allow inflation to run above the previous 2% target before any central bank intervention i.e. interest rate hikes. This change in policy saw yield curves steepen which led to losses for traditionally long duration fixed income benchmarks for the month.