Performance – Relatively Quiet Summer
This summer has been quiet as S&P stayed rangebound but there were key moves within asset classes, with EM equities up 2.5% in total returns, US HY posting another solid 2.9%, EM credit up 2.6% and Global Financials up 3.5%, the best performing sector across regions. Oil also bounced back last month, with Brent up 10.8%. Post Jackson Hole, the market probability of a Fed hike by yearend has risen but markets are still pricing in a relatively gradual pace of hikes. USD stayed largely unchanged in August.
Technicals – EM Net Issuance Going Strong
EM issuance continued to rise in August, with gross issuance up by 21% YoY. DM IG issuance remained relatively stable, with gross issuance up 6% YoY. Unlike their peers, DM sovereigns and HY issuance, both gross and net, continued their downward trend.
Sentiment – Market Fear Stays Low
Measures of market fear remained low last month. VIX, currently at ~13%, stayed range-bound throughout the month. Similarly, the MS Global Risk Demand Index* stayed around 1 before declining to a current level of 0.4.