In the US, the increase in GDP at an annualized rate of 2.1% in the second quarter compared to earlier estimates of 2.4% for the same period lifted hopes for an easing of the upward pressure on interest rates as the economy clearly grew more slowly than previously expected. The key metric of non-residential fixed investment was revised down to 6.1% compared to the earlier estimate of 7.7%. Separate data also showed total job openings falling to 8.8 million in July, the lowest since March 2021.

Elsewhere, the authorities in China have been trying to avert an economic slowdown by lowering the key interest rates on offer during the month by the People’s Bank of China.

In Europe, the PMI services survey for August declined to 48.3 and is below 50 for the first time since December of last year, in most part due to German economic weakness. In the United Kingdom, the news was not much better with the August manufacturing PMI down to 42.5, and the August services PMI declining to 48.7. This is the first time the services PMI has been recorded at below the 50 since January of this year. This negative trend was also evident in UK house prices which contracted in August at the fastest annual pace since 2009, falling by 5.3% compared with the same period last year.

Huw Pill, the Bank of England’s chief economist, suggested that while the UK central bank still had to be vigilant with inflation remaining at these higher levels, keeping interest rates at 5.25% could result in a decline in inflation from July’s annual rate of 6.8% to the Bank of England’s target of 2% over the next three years.

This subdued economic activity overshadowed the expectation of an eventual lowering of interest rates, previously believed to be sufficient to maintain the positive momentum in the markets, with the net result that the MSCI declined over the month by 2.6%.  The NASDAQ was down by 2.2% with the S&P500 faring slightly better, declining by only 1.8%. In the UK, the broad market as represented by the FTSE 250 declined by 2.8%, dragged down by the larger companies which did not perform quite as well and evidenced by the FTSE 100 which was down by 3.4%.  Smaller companies were no better off over the month with the Small Cap Index down by 3.2% while the AIM All-Share Index declined by 3.0%.  The Fledgling Index did slightly better, albeit declining in similar fashion, down by 2.9%. By comparison, the Athelney portfolio was down by 2.6% and, after providing for expenses, the NAV declined by 3.2%.

During the month we utilised some of the cash received by way of dividends to increase our holding in CBOX which resulted in our cash holding at month end comprising 4.5% of the portfolio.