Best and worst UK shares in August 2022

An optimistic start to August was short-lived, and asset prices have spent the past few weeks in retreat. Here are the best and worst stocks to own last month. 

A month of two halves for investors left the FTSE 250 index and AIM 100 languishing alongside the Nasdaq among August’s worst-performing benchmarks.

The 5.5% decline for the FTSE 250 included falls of around a third for ASOS (LSE:ASC), Marshalls (LSE:MSLH) and XP Power (LSE:XPP), while the AIM 100 shed 5.7% after 33 stocks surrendered 10% or more of their value. Big casualties included Greatland Gold (LSE:GGP), Boohoo (LSE:BOO) and semiconductor firm IQE (LSE:IQE).

Gains for BP (LSE:BP.) and Shell (LSE:SHEL) and the benefit of sterling weakness for overseas earners protected the FTSE 100 index, which lost 2% as one of the best-performing markets for investors in August.

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However, the headline figure masks the fact that 26 blue-chip stocks fell by 10% or more and in the case of GSK (LSE:GSK) and housebuilder Persimmon (LSE:PSN) by more than 20%. Rolls-Royce Holdings (LSE:RR.) and Centrica (LSE:CNA) dropped by 14% and Prudential (LSE:PRU) by 10% among the top flight’s other widely held stocks.

The deteriorating UK economic outlook, spiralling energy bills and prospect of further Bank of England interest rate rises derailed the recovery for retail stocks, with Next (LSE:NXT) ending the month 15% lower at 5,812p as it gave up all the gains from earlier in the summer.

For housebuilders, the performance in August represented an acceleration of the trends seen throughout the year as the economic uncertainty continues to cause investors to steer clear of the sector. Taylor Wimpey (LSE:TW.) shares, for example, fell 15% in August and are down by around 40% this year despite a strong operational performance and dividend yield above 8%.

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On Wall Street, the risk appetite in July and early August evaporated to leave the Nasdaq down 5.2% and back in bear market territory with a year-to-date fall of 24.5%. The Dow Jones Industrial Average and S&P 500 both lost 4% in the month despite a largely resilient earnings season, leaving them 13% and 17% lower so far in 2022.

The initial euphoria for markets in August was built on a stronger-than-expected US jobs report and an encouraging CPI reading, fuelling hopes that the US may have seen “peak inflation” and the Federal Reserve wouldn’t need to be so aggressive in hiking rates.

By 15 August, Deutsche Bank said 23 of the 38 assets across its coverage of equities, commodities, bonds and currencies were in positive territory. By the end of the month, this was down to just six after Federal Reserve chair Jerome Powell gave his “hawkish” speech to the Jackson Hole economic policy symposium.

He said last Friday that getting back to price stability would “likely require maintaining a restrictive policy stance for some time”, triggering substantial losses for markets as they began to factor in a faster pace of rate hikes.

In London, the resulting demand fears meant mining stocks Glencore (LSE:GLEN) and Anglo American (LSE:AAL) lost 5% of their value in the three sessions up to last night, just behind the 6% fall for AstraZeneca (LSE:AZN).

BP (LSE:BP.) also gave up some of its earlier gains as Brent crude ended the month back at $97 a barrel, representing a 12% decline overall in August in the worst performance since November.

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It was the first time since the pandemic that Brent crude has fallen for three months in a row, a performance reflecting growth concerns and potential for a revival of the Iran nuclear deal.

Despite this weakness, Deutsche Bank points out that oil remains the leading asset in its coverage on a year-to-date basis after rising 24.1%. European natural gas futures rose 25.7% over the month, meaning prices are up almost five-fold on a year earlier.

Energy’s impact on the inflation outlook and hawkish response of central banks caused sovereign bonds to lose significant ground in August, with Europe’s 5.1% decline the largest recorded by Deutsche Bank since the late 1990s.

The US dollar continued to strengthen in August, resulting in sterling’s worst month against the greenback since October 2016 following a 4.5% fall. One exception to the downward pattern for equities in August was in emerging markets, with the MSCI EM index posting a resilient 0.4% gain in the month.