Monthly Review for September 2020

  • 15 October 2020
  • 5 mins reading time

Global equity prices fell in September as Covid-19 cases surged in Europe and uncertainty rose over the US political outlook. Demand for and prices of government bonds rose as investors sought perceived “havens” in which to place money.


UK equities were pulled down amid renewed fears of a negative outcome to Brexit talks, while US investors were watching their politicians exchange fairly acerbic comments as they failed to agree on financial stimulus to help support businesses and households during the epidemic. In addition, it became unclear if a smooth electoral transition would be possible should President Trump fail to win re-election.

The combination of these worries suggested that economic stability could suffer, and that led to lower oil prices pulling major energy companies’ stock prices down.

In Europe, energy companies were joined in their sharp downward trajectory by banks and others in the financial sector. This was caused by the rapid rise in Covid-19 infection numbers, notably in Spain and France, leading to new restrictions and the inevitable reduction in spending and growth.

Rising virus numbers also took their toll on investor confidence elsewhere, though escalating tensions between the US and China added to worries.


In fixed income, the more uncertain mood drove investors to place more money in lower-risk rated assets such as government bonds. That pushed their prices up and their yields down (the price and yield of a bond always move in opposite directions).

The level of uncertainty has been heightened for a sustained period. As a result, government bond prices were already at very high levels, so further rises were fairly small. The move affected most major western government bonds.

There was an additional factor to consider in the UK where the Bank of England has been refusing to exclude the possibility of negative interest rates. Aside from squeezing profits that banks can make on the loans that they issue to customers, this can also push the prices of government bonds up further.

The demand for and prices of higher-risk rated bonds either remained little changed or, among the highest-risk rated bonds, actually fell. This further reflected investors’ willingness to avoid risk and try to reduce losses. This fall affected bonds issued in emerging markets such as Eastern Europe and parts of Asia.


September was a bleak month for a range of commodities. Oil prices were dragged down by a combination of increased supply and the anticipation of falling demand. Precious metals such as gold and silver have risen very sharply in recent months as investors sought assets that they believed would hold their values or rise in an increasingly difficult environment. The prices became so high that further rises seemed unlikely in the short-term leading them to drop a little in September.

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