August started badly for global equities but sharply reversed course and finished positively. The global MSCI All-Country World Equity index rose 2,4% during the month (in USD) and now has had positive returns in 9 out of the last 10 months. The index is up currently more than 15,5% for the year and is at all-time high levels. The abrupt equity sell-off at the beginning of the month was sparked by the publication of some disappointing US economic data, which coincided with a surprising interest rate hike by the Bank of Japan. The dip was brutal – the Japanese TOPIX equity index dropped 12,4% on August 5th, its second-largest daily decline ever on record – but short-lived. Stocks staged an impressive recovery on the back of news about still expanding American economy and positive corporate earnings growth. Investors were also encouraged by the message from the U.S. Federal Reserve’s Chair, who commented that “the time has come” (to reduce interest rates). The US dollar fell more than 2% on the news, and bonds rallied. Other interest-rate-sensitive asset groups, like real estate for example, also performed quite well – indeed, the Global REITs index rose 6.2% in August. Besides Real estate, Healthcare and Consumer staples were also top performing sectors for the month, while Energy and Consumer discretionary lagged. Investors preferred lower risk stocks, with defensive fundamental value measures (low Price-to-Earnings ratio and higher dividend yield). The rotation away from the IT sector and growth stocks continued, and the equity rally broadened into the wider market, favoring well-diversified investors. European shares chalked up another strong month in August and were the best performing global region for a second-straight month (in USD). Data revealed that inflation was receding across the continent and was well below 3% in all major economies – a fact that might induce the European Central Bank (ECB) to trim rates further. On the commodities markets, despite the weaker US dollar oil prices declined (on fears about future demand), while gold prices continued their march to new record highs. For the investors in the fixed income markets, August was a positive month. Concern about the economic outlook led investors to expect more aggressive rate reductions from major central banks in the coming months, and this lifted bonds – the Bloomberg Global Aggregate bond index posted a return of 2.4% for the month (in USD). This mood was more pronounced in the US, where the Fed is almost certain to start the cycle of interest rate cuts in September, and US bond markets outperformed those in other major economies. 
              After a terrible first week, shares in the US recovered to finish August positively. The broad S&P500 index gained more than 2% in what was its ninth positive month out of the past ten. The industrial Dow Jones added nearly 2% while the tech-heavy NASDAQ finished almost 1% higher. That was a remarkable reversal from August 5, when the NASDAQ sank briefly as much as 10.7% from its July 31 closing level. The volatility was caused by the publication of some disappointing economic data that fueled fears about a US recession. The July reading of the Purchasing Managers’ Index (PMI) for manufacturing came in well below expectations (46.8 vs. 48.8; a value below 50 indicates contraction); the July jobs report was also weak with the smallest number of payrolls increase in more than three years. Furthermore, unemployment continued to rise to 4,3% – the highest in nearly three years – triggering the Sahm Rule indicator (when the last three months average of the unemployment rate exceeds by more than 0.5% its lowest level from the prior 12 months), which has been a very reliable indicator of impending recessions. However, fears about a US recession might appear exaggerated given the strength of the labor market and consumption. Albeit rising recently, the unemployment rate remains well below its long-term average since the Second World War of 5.7%. US retail sales rose by 1% in July, beating expectations of 0.3%, and separately, an indicator that tracks U.S. consumer sentiment exceeded expectations slightly, rising for the first time in five months. Coupled with data for falling inflation (which dropped below 3% for the first time in over three years), this increases the chance that the Fed is going to deliver several rate cuts this year, starting in September. The prospect of lower borrowing costs for smaller companies sparked a rally for their stocks – the Russell 2000 Index (of small-cap firms) jumped 3% on the day of the Fed’s Chair’s speech. Indeed, the earnings growth broadened outside of the technology sector and this was reflected in the market – consumer staples and real estate were the top performing sectors for August, while energy and consumer discretionary recorded negative returns. US Treasuries outperformed other markets, because investors now expect the Fed to cut rates to cut rates more aggressively than the ECB in the coming few months. Emphasizing the advantage of a well-diversified approach to investing, we note that fixed income provided protection during the abrupt equity sell-off at the beginning of the month – balanced portfolios held up well, as bonds provided a buffer and cushioned market volatility. Bond yields fell through August (meaning that their prices rose) – the yield of the important 10-year US Treasury closed the month at 3,91%, having dipped as low as 3,66% at one point; the yield had been as high as 4.70% just four months ago. The US yield curve steepened over the month as yields on shorter maturity bonds fell by more than those at the long end.
              European stocks registered another strong month in August and were the best performing region globally for a second month in a raw. In local currency, Europe underperformed the US: the broad pan-European equity index Stoxx600 added 1,3% for the month (vs. 2,3% for S&P500). Inflation fell, but the overall economic background remained bleak, and earnings from cyclical companies disappointed. As some asset prices have flattened in the past six months (housing has even declined in some places), inflation has subsided across the continent. Data showed that annual inflation in the 20 countries that use the euro currency fell to the lowest level in about three years – to 2.2% in August (down from 2.6% in July). This drop in inflation so close to the ECB’s 2% target makes it more likely that the central bank would cut rates at its September meeting (following a 25 basis points cut in July; which was the first since 2019). In the UK, the Bank of England made its first rate cut in four years on 1 August, reducing the Bank Rate by 25 bps to 5.00%. UK equities rose over the month. On the continent, expectations of further interest rate cuts helped to boost rate-sensitive sectors, such as real estate. Real estate and (tele)communications were among the strongest performing sectors while energy and technology lagged. Meanwhile, the Eurozone PMI came it higher than expected at 51.2 in August (from 50.2 in July), supported by the services sector, while European manufacturing continued to contract (with a reading below 50). The service sector, which is largely tourist and travel-related services, was boosted by the event of the Olympic Games in Paris, which had such a noticeable effect. Politically though, the continent is troubled, as as France deals with a political stalemate and the German ruling coalition looks increasingly shaky, while the war in Ukraine rages on.  Similar to the effect with equities in August, European sovereign debt benefited from the positive backdrop for bonds but to a much lesser extent, and markets saw modest gains: the yield of the benchmark 10-year German bund remained almost unchanged closing August at 2,29% (from 2,30% at the end of July). Corporate bonds outperformed government ones, although not as strongly as in the US, as lower manufacturing PMIs in Europe revealed potential vulnerability to economic shocks.
              Unlike the strong gains in most international markets in August, the indices of the Bulgarian Stock Exchange performed unconvincingly. The company with the largest market capitalization in both the flagship SOFIX index and the broad BGBX40, Shelly Group AD, fell more than 7% for the month (the worst performing stock for August) and this was enough to drag both indices into a slight loss. Only the real estate stock index, BG REIT, rose nearly 4%, in line with the general upswing in real estate (given the approaching interest rate cuts globally). The index benefited mostly from a jump in the share price of its heaviest constituent, the Bulgaria Real Estate Fund, which was also the strongest performing stock on the BSE, up 17.4% in August. During the month BSE AD started paying its dividend – the general meeting of shareholders approved 100% of the 2023 profit to be distributed as a dividend to shareholders. The gross amount of the dividend per share is BGN 0.30 and the total amount distributed – almost BGN 2 million. At the end of the month, trading also started with the bonds issued by the leasing company ELG AD – the second bond issue realized on the growth market, beam, was successful, as the company managed to place all 5,000 bonds offered.