What moved the markets in August? Tension between U.S. and North Korea dominated the news cycle in a month book-ended by North Korean missile concerns. The month started with a North Korean threat to fire ballistic missiles near the US Pacific island territory of Guam. The posturing and rhetoric between the two sides ramped up again at the end of the month after a missile was launched over Japanese airspace.

 

Market highlights:

Both actions left markets somewhat on edge while a tragic terrorist attack in Spain also weighed on risk appetite. As a result of these concerns, yields on benchmark US and Canadian 10-year bonds declined ~20 bps to 10- and 2-month lows respectively

 

The trend of stronger Canadian economic data continued in August. Canadian GDP rose 4.5%

 

NAFTA renegotiations commenced in mid-August with Mexico, Canada and the U.S. all outlining their objectives. The U.S. Chief negotiator Robert Lighthizer said that more than “mere tweaking” was needed to the current agreement

 

Spot Gold acted as a safe haven asset and had its largest monthly gain of the year, rallying 4% and closing the month at an 11-month high at $1320 per ounce

 

The US dollar lost ground and the Dollar Index touched its lowest level since January 2015. Canadian dollar ended the month unchanged, trading close to the 2017 highs at $0.8011/USD

 

Global developments:

Euro area growth has improved consistently over the past nine months, and the euro appreciated to a 2.5 year high versus the U.S. dollar, ending the month up ~2.0% at 1.1910

 

In China, economic data was disappointing…

 

Key refineries in Texas, the energy hub of the U.S. have been shut down due to Hurricane Harvey, the strongest storm to have hit the U.S. since 2004. The storm is affecting the distribution of crude and products on pipelines, and has sent gasoline prices to the highest level in more than 2 years. WTI Crude oil prices on the other hand declined 6.2% in the month to $47

 

What to expect going forward. The major U.S. stock indexes are at new highs and we continue to be amazed at the number of headlines that are warning of potential problems ahead. At historic market tops, recall that very few were worried, with most investors and stock market gurus being very optimistic. The current bull market is different and is being met with a good dose of doubt. Even though corporate earnings and the economy have been growing in a positive trend, many domestic and international concerns are shifting the focus to what is “bad” or could go wrong, rather than on the forward progress that has been made. So, while it may be a popular choice to be part of the crowd that is worried about the future, you shouldn’t lose focus of the progress that the markets and economy have made.