You would be hard pushed to believe they do, looking at how the FTSE 100 index performed last week. By the middle of the week, the 5,300 level had been regained. That was hardly a milestone but, with oil trading above $70 because of the disruption of supplies in the Gulf of Mexico, it was a remarkable performance.However, there was not a great deal remarkable about August. On average, world equity indices trended slightly lower. Of the developed markets, Japan delivered the best return, rising by 7 per cent over the month. But the best result came from Russia, where gains almost reached double digits. It is not hard to see why Russia proved such an attraction. Investment in the country’s oil infrastructure is starting to pay off and, as an oil-rich nation, it benefited from the star performer of the month. Of course, it is the after-effects of hurricane Katrina that brought about this rise. The vulnerability of US oil supplies has been brought into sharp focus. Not only is much of US oil production located in the Gulf of Mexico, directly in the path of the hurricanes that are formed in the Caribbean, but the ports which handle the imports from foreign countries and the refineries, which deal with both sets of supplies, are also clustered in this region. But financial markets in the US also appeared sanguine in their reaction to events. As the news unfolded, leading equity indices barely shifted. Nor were bonds affected by the likely cost of the disaster. The US bond market is the site of one of the strangest scenarios being played out. Despite protestations that growth is robust and further monetary tightening is inevitable, longer-dated bonds are pointing to lower interest rates, with the yield curve inverting over certain durations. Such a scenario does not help the business of asset allocation. But the appetite for equity investment is returning to private investors, as was revealed by last week’s sales figures for unit trusts. That is not necessarily an encouraging sign. Private investors are notorious for piling in at the top of the market. Still, the belief is growing that markets are capable of producing positive returns, notwithstanding the gains already delivered this year.