After the spike in volatility in August, markets returned to a semblance of stability in September, but this masked some big underlying shifts across and within asset classes. Most notable was a sharp reversal early in the month of bond yields, which until then had trended inexorably lower throughout 2019: the yield on 10 year US Treasuries moved from below 1.5% at the beginning of the month to 1.9% within a matter of days. Somewhat more positive economic data and an apparent thawing of trade war rhetoric between the US and China proved to be the trigger for a reversal of some of the big bond moves seen in August, and risk appetite picked up.

The nervousness which had been creeping into markets during July intensified in August, with growing fears of a more broadly based global economic slowdown than the manufacturing contraction evidenced in the past 9 months. Equities fell sharply across the board, with the largest falls in the most economically exposed sectors and financials, the latter suffering from the dramatic shift down in interest rate expectations in recent weeks. In contrast, safe-haven government bond markets rose sharply, taking yields in many cases to new all-time lows. In the same vein, industrial commodity prices fell sharply, with the key iron ore price falling by 24% in the month, whereas precious metals rose; gold was up 7.5% in August, taking its rise this year to 19%, while silver did some catching up with gold, rising 13% in the month, bringing its rise this year in line with gold.

While most markets extended their gains in July and Wall Street reached new all-time highs, the moves were more muted than in the first half of the year, with some markets falling, notably in Asia, taking the Emerging Markets index down 1.2%. Gains that were made were modest, with the UK the biggest gainer in local currency terms, up 2.1%, but this was driven largely by a sharp fall in sterling which benefits the big listed offshore earners which dominate the UK stock market. Government bonds were generally firm as yields drifted lower while credit markets performed well with investment-grade corporate and high yield bonds each returning 0.6% and emerging market debt 0.8% in the month, taking a year to date returns for all 3 sectors into double digits.