Summary
Yet again, as with the first few trading days of August, the start of September proved to be very volatile as events in the US and across the world turned the market sentiment negative. This time it would be an actual 50 basis point cut in US interest rates by The Federal Reserve that completely turned things around and set the tone for the rest of the month.

After many false dawns, finally the market got the larger US cut that many commentators had hoped for since the start of 2024. To this one could add the news that China’s financial stimulus had at long last proven to be effective, with many stocks displaying returns in excess of 20% over a matter of days. To say both outcomes had been a long time in the making would be an understatement.

The Vanilla Blue Chip portfolios returned a more modest 2.15% during the month, with most of the holdings providing positive returns, which is in line with the return of the S&P 500 Index.  Perhaps surprisingly, the position in Berkshire Hathaway was down by 3.3%, but this was offset by the strong performance of the Consumer Discretionary stocks, 5 of which were in the top 10 performers for the month. These ranged from Amazon, up 4.4% to Home Depot that returned 10% over the same period. The computer chipmaker, Advanced Market Devices, provided the best performance of 10.4%, but it did show signs of a momentum reversal by month end.

August Turmoil Spreads to September Key Points:
·         China Stimulus: China’s government introduced new fiscal and monetary measures, boosting its stock market by             nearly 25%.

·         Fed Rate Cut: The Federal Reserve surprised markets with a larger-than-expected 0.5% rate cut, easing financial              conditions.

·         Middle East Conflict: Despite calls for peace, conflict in the Middle East intensified, with hostilities spreading to                Lebanon.

·         US Economic Data: US retail sales and industrial production expanded, but the labour market remained mixed                 with job gains underwhelming expectations.

·         Inflation Trends: US headline inflation fell to 2.5%, while core inflation stayed higher at 3.2%, signalling persistent             price pressures.

·         European Outlook: Eurozone economic data weakened, with the Composite PMI contracting, while UK inflation              continued to rise.

·         Gold’s Surge: Gold prices soared 5.2% for the month in GBP, reaching a new high, as investors sought safe-                      haven assets.

·         Bond Markets: US 10-year yields briefly hit a year-to-date low of 3.6%, as shorter- dated bond yields fell more                  sharply.

All’s well, that ends well, at least for the time being. Perhaps the most telling statistic though was the realization that September proved to be the first year since 2013 when the S&P 500 Index delivered a positive return for a month known for its ability to deliver negative surprises. The robust performance by the US Consumer Discretionary sector suggests the US economy is not on its knees, but with ‘hard-to-predict’ politics now dominating the Middle East and the US presidential elections, it would be a brave person who doesn’t expect a pull back in the months ahead.