Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

ANOTHER Friday, another three charts spotted by our team. With autumn just around the corner - the days are getting shorter, but there’s no shortage of news.

This week’s charts revealed some fascinating market stories - with a brilliant chart exploring the complex relationship between US inflation, bonds, shares and interest rates - six new countries added to the BRICS bloc of nations and mounting demand for European warehouses.

Enjoy your weekend. And we'll see you next week.

1. Shares, bonds, interest rates and inflation - it’s complicated

US inflation was marginally higher than expected in August at 3.7%, and quite a bit up on July’s 3.2% reading. Despite this, shares and bonds rose slightly after the announcement on Wednesday as investors decided that the Federal Reserve will view this as a temporary blip when it sets interest rates next week.

The main driver of the increased headline inflation rate was the increase in the oil price since Saudi Arabia and Russia announced supply cuts to prop up the cost of crude. But core inflation (which strips out energy) fell between July and August from 4.7% to 4.3%. Fed watchers think this will be enough to keep the US central bank on hold at its meeting on 20 September.

The chart here provides a slightly longer view of this complex relationship between shares, bonds, interest rates and inflation. It shows the variable lag between changes in the economy and the impact being felt in financial markets.

Shares turned lower in 2022 as interest rates and bond yields rose following the sharp rise in inflation which started in 2021. But then the S&P 500 turned higher again as inflation fell, even though interest rates were still rising. At about the same time, bond yields began to level out as investors started to look forward to a change in direction from the Fed’s rate setters.

There’s clearly a link between all these factors but trying to time the turns of stock and bond markets is very difficult. Far better, we believe, to keep your eyes on your long-term financial goals and remain fully invested in a balanced portfolio.

Learn about our five investment principles and why time matters when it comes to investing.

'timing the returns' looks at the relationship between US inflation, shares bonds and interest rates.

2. Six new countries join the BRICS and make up a whopping 30% of global GDP 

When it was first conceived of, the BRICS bloc of nations - comprising Brazil, Russia, India, China and South Africa - was forecast to become the global economic powerhouse for decades to follow.

As it turned out - and as this chart shows - GDP growth among the BRICS has been dominated by China, with each of the others - with perhaps the exception of India - facing obstacles that have meant they have struggled to keep pace.

Now, with the BRICS grouping expanding to include Ethiopia, Saudi Arabia, Argentina, UAE, Egypt and Iran, the bloc will take up a collective 30% of global GDP. But the experience of the past two decades, since the BRICS were first grouped together, suggests we should not expect these economies to necessarily take off.

The significance of the BRICS may be in the diplomatic and geopolitical - rather than the economic - sphere.

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3. Warehouse prices see a steep rise

As shoppers switch to buying online, high street rents have collapsed. On the flip side, warehouse prices are on the up. Partly in response to this shift. Partly due to reshoring, as companies look to secure their supply chain resilience.

With fewer facilities now being built there could be even further room for growth over the coming few years - making the European logistics a sector to watch. 

The chart below shows, in the last three years, the pace of growth of rental income for European warehouses has accelerated far faster than high-street retail units or offices.

But why are warehouse rents soaring? Well, the answer lies in the shift to online shopping - this is also partly to blame for the collapse in high street rents in recent years.

Over the course of the pandemic, there was far greater demand for logistics real estate as ecommerce activity soared.

Although lockdowns are now over, the shift from offline to online continues. Within Southern Europe, the take-up of online shopping was far lower compared to markets like the UK - and that’s boosting demand for warehouse space across the whole region.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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