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Market Update

August 2014 Update

Another good month for property, but equities and bonds disappoint

While UK equities rose at the start of July, they then fell sharply and ended the month slightly lower. Taking their lead from the US, technology stocks lost ground amid concerns about expensive valuations. On the upside, financial stocks were among the gainers. Royal Bank of Scotland’s shares rallied as it reported first-half profits before tax that were nearly double those of the same period last year, beating analysts’ expectations. The bank said that the improvement was mainly due to the recovery in the UK economy.

Elsewhere, European equities continued to fall, finishing the month down more than 2%. Investors’ sentiment continued to be influenced by a number of issues. On the negative side, there was some weak economic data, concerns about how sanctions on Russia might affect the region, and worries about the results of bank stress tests, which are due in October. On the positive side, sentiment was helped by measures taken by the European Central Bank.

US equity markets were slightly down despite encouraging second-quarter company profits. Over 75% of those that reported figures came in better than analysts had expected. Positive profits news didn’t always translate into share price gains though. For example, while Apple reported profits that far exceeded forecasts, it also said sales of the iPad had fallen, which led investors to speculate that sales of the device have reached their peak.

Meanwhile, July was a negative month for bond markets in the UK and US. In part, this was because of encouraging economic news. Estimates for second-quarter UK GDP growth came in at 0.8%, which translates into an annual rate of growth of 3.1%, the fastest since the end of 2007. Although good economic news is generally bad for ‘safe haven’ assets, such as government bonds, the escalation of fighting in Ukraine and Gaza ensured investors were wary of moving too far from the asset class.

Commercial property once again proved the pick of the main asset classes, continuing its surge over the last year or so. It’s worth noting that the real estate recovery continues to be fuelled by strong buying activity, rather than rental growth. Rents remain generally lacklustre, rising only 1.3% so far this year, and driven entirely by growth in the office and industrial sectors. Retail rents have remained weak so far this year, as high street vacancies and competition from online retail negatively affect the sector.

Should I make any changes to my investments?

Everyone’s circumstances are different and we aren’t able to give you advice on what is appropriate for you. As always, if you are considering your own position, you should remember why you invested in the first place and consider the lifespan of your investments. Most importantly, you should seek financial advice before making any changes to your investments.

One way in which you can help reduce the impact of any market volatility is to spread your investments across different asset classes and regions. For more information about investing across different asset classes, take a look at our An introduction to diversification in multi-asset funds guide.

Remember that before making any changes to your investments, you should seek financial advice. If you don’t have a financial adviser, you can find one local to you by visiting find a financial adviser, which is responsible for promoting financial advice in the UK.

All figures quoted are in sterling terms to 30 June 2014 unless otherwise stated.

The information contained in this article has been derived from sources which we consider to be reasonable and appropriate. It may also include our views and expectations, which cannot be taken as fact.

Investment markets and conditions can change rapidly and, as such, the views expressed in this Update should not be taken as statements of fact nor be relied on when making investment decisions. Forecasts are opinions only, can not be guaranteed and should not be relied on when making investment decisions.

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