Longer-dated bond yields turned decisively upwards, the US long bond yield reaching 2.3%, and a consequent steepening of yield curves as central banks hold the line on short-term rates. For most of the past 50 years, longer-dated sovereign bond yields have been higher than equity yields (rationally). The deflationary period since the financial crisis has been the exception, so a return to higher bond yields should not be too much of a surprise, but such an adjustment will create bumps for equity markets.

World equity indices fell around 3% over the month but this disguises some big shifts. The NASDAQ has fallen 10% overall, Apple is down by 14%, Amazon by 11% and Microsoft by 7%. Rather more rationally, a number of the not-yet-profitable stocks have been hit hard (discounting possible future earnings at higher rates), Spotify is down by around a quarter, while Tesla have fallen by more than a third. The pharmaceutical sector has also struggled, though with rather less drama, Johnson & Johnson off by 5%, Novartis by 4% while Abbot Laboratories gave back some of the gains from last month. Valuations here look increasingly hard to justify, a number of these stocks look cheap (as do some of the leading, profitable, techs).

In the opposite direction, the oil majors had a bumper month as the price of Brent blend gained a further 12%. BP and Repsol gained around 25% while most of the rest of the majors were up by 20% or so. The banks roared ahead again, in Europe, Société Génerale jumped 26%, Deutsche Bank the same and ING Groep by 35%. It was also a strong month for the insurers and re-insurers, Allianz rose 10%, Aviva by 16% (bolstered by good figures) and Prudential by 20% (also good figures and announcing the spin-off of their US division, Jackson), Swiss Re by 10% and Munich Re by 13%.

Industrial and mining stocks also benefitted from the change in sentiment too; Johnson Controls was the feature, up by 30% already this year, the background for this building controls company looks encouraging. General Electric and Saint-Gobain also performed well, as did Anglo American amongst the miners. Consumer Staples were quieter this month after a dull period, value is certainly to be found amongst the leaders here, in moves reminiscent of the old ‘Cola wars’, Coca-Cola rose 4% in anticipation of greater consumer demand but PepsiCo continued to drift down (a further 5% this month) as they have all year.