The August backdrop was more favourable to safe-haven assets, as evidenced by a rise in gold prices (up 4% and hitting a one year high) and a slight out-performance of government bonds over equities. However, for sterling investors, the weakness in the pound helped boost the returns of overseas assets and led to positive returns for all Flying Colours portfolios in the month.

Among equities, emerging markets have now outperformed developed markets for an 8th month in a row, supported by strong Chinese and Brazilian indices. The out-performance of emerging was significant in August, with the gap between the two more than 2% in the month.

At a sector level globally, the performance gap between technology and energy moved another 5% and is now an extraordinary 37% year-to-date (energy down 7.5% and technology up 29.5% year-to-date in US dollar terms). Energy is now looking like a sound contrarian buy idea, given the recent under-performance.

Within fixed income, UK gilts were the best performer, with emerging market debt assets also benefiting. More broadly, developed world government debt outperformed corporate debt following a flight to safety and a reduced likelihood of interest rate rises in the short term in the developed world.

Looking forward, we remain cognisant of the risks in financial markets, with valuations looking stretched within both bond and equity markets. At the same, central bank easing continues to support risk appetite and improving economic conditions in Europe mean we remain fully exposed to equity markets.

Guy Myles, Chairman, Flying Colours Investment Committee