The advisory portfolios had a strong August, all posting positive numbers in what was a muddling month for asset classes overall. Mid-month there was a lot to digest for investors with I would say the first signs of volatility coming back into the various markets for bonds, equities and commodities. This has split into September but comments will stay focused on this month’s overview.

The biggest battle we see currently is in the direction of inflation with mid-month deferrals of the second US stimulus bill looking like being the end of September at the earliest. This meant sell-offs in asset classes such as gold and inflation-protected bonds, Gold had reached a peak close to 2100 but has dropped and seems to be trading in a range of around 1950. We have held our overweight position as we still sit on the inflation risk fence that low long term inflation. I think this theme was somewhat reflected at month-end and I have a deeper view that as much as some sales chains, such as our own with video meetings have been officiated I see short to medium term issues with the supply of goods and this will likely lead to inflationary pressure. Just this week in the FT (Financial Times) there was a good example of this applied to a rabbit purchase. The journalist’s pet rabbit had died during the lockdown and she set out to replace it but could not find one due to the sudden demand for small pets. She ended up paying triple the standard amount to replace her furry friend. This theme resonated with me and this is why we will keep our gold overweight for the time being.  There was continued out-performance in many sectors for actively managed funds and this is something adopted into thinking in the Cape Berkshire equivalents. Early October will see the realignment of these AWM portfolios to their Cape Berkshire led equivalents, performance-wise there has not been too much difference Q3 to this point.

Positives on the month were the small and midcap UK positions we hold as part of our UK allocation. The FTSE had a torrid month finishing sub 6000, at a time the Nasdaq the US tech index was running away higher. The service-based nature of the UK economy has hurt our domestic recovery but there must come a point where there are some attractive fund or investment trust-based value plays. Either way, the Merion UK Smaller Companies fund up 6.68% was a real star performer on the month. Of other note was the resignation after a long period of governance of Prime Minister Abe in Japan which we will see the fallout in the coming months. We remain underweight Japan vs benchmark, not with mass negativity but as I always remind clients the overweight’s must be funded from somewhere. Of note, we again saw a good recovery of the Indian Alquity fund where like the UK mid and small caps outperformed.

Our next note will be our quarterly update where we will look further to BREXIT and the pending US election in quarter 4. Enjoy the month.