FYI | Aug 31 2007
By Chris Shaw
If the volatility in August wasn’t enough for investors then bracing for more in September may be a good idea, as Barclays Capital’s seasonal trends review for the coming month shows it is traditionally a poor one for equities.
On the back of a four-year winning streak in September India’s Sensex Index has the highest chance of an advance in the group’s view at 64%, while Australian investors can take heart from its assessment the All Ordinaries has a slightly better than even money chance of posting gains.
Overall though global equities traditionally lose ground in September, the group noting the Dow Jones Index is traditionally one of the worst performers. A repeat of such an outcome in the US this year would certainly not improve already fragile investor sentiment stemming from the recent market uncertainty.
In foreign exchange markets the US dollar usually struggles against the other major global currencies in September and in particular against the euro and the Swiss franc. The euro also tends to do well against the yen, while the group estimates there is a 56% chance the Australian dollar can post gains against the greenback in the coming month.
The recent weakness in natural gas prices may be coming to a close as Barclays notes it remains the best performing commodity in September, while energy prices generally along with precious metal prices tend to push slightly higher. The group gives silver a slightly higher chance of an advance than gold this year.
Aluminium has the lowest chance of an advance among the base metals in the group’s view, while copper is given an almost even money chance of moving higher. Barclays notes maximum returns for the month in the base metals sector are only of the order of 7-8%, so any advances or declines seem likely to be relatively modest.
The coming month is traditionally a good one for fixed interest investments, though Barclays points out it is longer duration rather than shorter duration securities that tend to perform the best.
The group suggests Swiss and Australian 10-year bonds have the least chance of a yield increase this year, while equivalent securities in the EU and US have only a slightly higher chance of seeing yields moving higher during the month.
