Monthly Review and Outlook August 2026

Global equities moved higher during August, supported by improving sentiment towards technology stocks and evidence that economic growth has remained relatively resilient despite higher interest rates.

• United States: US equities advanced during the month, led by the information technology and materials sectors. Strong quarterly earnings from several technology companies, particularly those linked to artificial intelligence, helped restore investor confidence following weakness in July. Economic data remained broadly supportive, reinforcing expectations that growth can continue despite elevated borrowing costs.
• Europe: Eurozone equities posted modest gains. Information technology, communication services and financial companies performed well, while more defensive sectors lagged behind. Investors continued to weigh steady economic activity against inflation that remains above central bank targets.
• United Kingdom: UK equities delivered a small positive return. Basic materials stocks outperformed, benefiting from stronger commodity prices, while healthcare, consumer staples and energy companies were weaker. Market sentiment continued to be influenced by expectations for future interest rate decisions from the Bank of England.
• Japan: Japanese equities moved higher during August. A weaker yen provided support for export-focused companies, while a number of businesses reported solid quarterly earnings. Investors continued to monitor inflation trends and the Bank of Japan's highly accommodative policy stance.
• Emerging Markets: Emerging market equities outperformed developed markets in US dollar terms. South Africa, South Korea and Taiwan were among the strongest performers, benefiting from a recovery in technology shares, a weaker US dollar and stronger commodity prices. Although escalating tensions in the Middle East contributed to oil price volatility, the impact on emerging markets was more limited than in developed economies.

Fixed income markets experienced another challenging month as government bond yields rose across many major regions.

Concerns that inflation may remain higher for longer continued to dominate investor thinking. Elevated energy prices, resilient inflation data and uncertainty surrounding future central bank policy all contributed to rising yields and falling bond prices.

In the United States, inflation remained above the Federal Reserve's target while the labour market stayed close to full employment. Although softer payroll and retail sales figures pointed to some moderation in economic activity, investors became increasingly focused on comments from Federal Reserve Chair Warsh at the Jackson Hole symposium, which were interpreted as signalling a more hawkish approach to monetary policy.

European government bonds also came under pressure as markets continued to price in the possibility of further interest rate increases from the European Central Bank. Similarly, expectations for higher rates in the UK weighed on gilts as policymakers balanced persistent inflation against slowing economic activity.

Japanese government bonds were among the weakest areas of fixed income markets. Investors remained concerned that the Bank of Japan's highly accommodative stance may become increasingly difficult to maintain given elevated inflation levels.

Corporate bond markets were relatively stable despite broader weakness in government bonds. Credit spreads for US investment grade and euro-denominated investment grade bonds changed little over the month, suggesting investors remain relatively comfortable with corporate balance sheets and default risk.

Commodities posted positive returns during August, supported by strength in both agricultural and energy markets.

Agricultural commodities performed particularly well as concerns grew about the potential impact of the El Niño weather pattern on crop production and global supply chains.

Energy markets remained volatile as investors monitored developments in the Middle East. While geopolitical tensions continued to influence oil prices, broader commodity markets also benefited from improving demand expectations and resilient global economic activity.

Looking ahead, the path of inflation and interest rates is likely to remain a key driver of market performance.

August reinforced the resilience of global equity markets, particularly in sectors linked to technological innovation and artificial intelligence. Strong corporate earnings provided reassurance that many businesses continue to adapt well to a higher interest rate environment, although valuations in some areas remain demanding.

At the same time, bond markets continue to face challenges. Persistent inflation and uncertainty around the timing and scale of future central bank action could result in further market volatility, particularly if economic growth remains stronger than expected.

Geopolitical risks, including ongoing tensions in the Middle East, also remain an important consideration for investors given their potential impact on energy prices and inflation expectations.

While short-term market movements are difficult to predict, economic growth has generally remained resilient across major regions, supporting company earnings and providing a constructive backdrop for investors. Maintaining a well-diversified mix of investments across asset classes, sectors and regions remains an important way to navigate changing market conditions and stay focused on long-term financial goals.

Forecasts of future performance are not a reliable guide to actual results, neither is past performance a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and are not guaranteed, and the investor might not get back their initial investment.

Any views expressed are our in‑house views as at end‑August 2026. Investment markets and conditions can change rapidly, and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

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