August was another month in which markets were shaped by a delicate balance between optimism and uncertainty. Strong corporate earnings and continued enthusiasm for technology and AI provided support for risk assets, while softer economic data offered some relief on the interest-rate front. Yet beneath the positive market performance, several important themes are becoming increasingly difficult for investors to ignore, from persistent inflation and rising government debt to the scale of borrowing required to fund the AI investment boom and an increasingly complex geopolitical backdrop. With several of these forces likely to remain influential through the autumn, our Chief Investment Officer, Jeff Brummette, takes a closer look at what drove markets in August and what it could mean for investors in the months ahead.
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Technology stocks continued their positive momentum in August, building on the gains they witnessed towards the end of July. Strong company earnings were a major driver, as the second quarter saw the best quarterly U.S. corporate profit results in five years.
Profit Margins of U.S. Corporations
Source: Bureau of Economic Analysis, Bloomberg
Weaker than expected U.S. employment data eased concerns over further interest rate rises, helping support both bond and equity markets. This was followed by an announcement from the U.S. Treasury that they would be increasing the size of their buybacks of longer duration off the run bonds (which they fund by issuing short term Treasury bills). The markets read this as an attempt to cap longer term yields and perhaps devalue the dollar. In response, the U.S. dollar weakened, while gold, silver and bitcoin all moved higher.
Gold, Silver and Bitcoin vs USD
Source: Bloomberg Finance L.P.
Equity Markets
Index returns are in local currency terms except where noted
Source: Bloomberg
Fixed Income Markets
Source: Bloomberg
Alternative Investments Markets
Commodity returns are versus the U.S. dollar
Source: Bloomberg
Currency Rates
Exchange rate changes are versus the U.S. dollar
Source: Bloomberg
Despite ongoing tensions in the Gulf, oil prices remained relatively stable during August. Hopes of a potential peace agreement helped balance concerns over regional instability and disruptions to shipping routes, leaving Brent crude trading in a relatively narrow range of $80 to $90 per barrel.
Oil Price ($/barrel)
Source: Bloomberg Finance L.P.
The U.S. announced further economic sanctions on an already heavily sanctioned Iran. There is little expectation by markets that it will alter Iran’s behaviour.
Inflation remains stubbornly above the 2% target chosen by the major central banks.
EU, UK and U.S. CPI
Source: Bloomberg Finance L.P.
The Bank of England is expected to keep interest rates unchanged, as a soft labour market and slowing wage growth leave them confident that inflation will return to target. The European Central Bank has already hiked once this year and may do so again as they focus solely on inflation. Whilst the U.S. Federal Reserve (“Fed”) faces a more challenging backdrop under its new Chair, Kevin Warsh, as policymakers balance persistent inflation against signs of slowing economic growth. Markets remain sceptical that inflation will return to target quickly and continue to price in the possibility of further interest rate rises. At the same time, a number of policymakers have signalled a willingness to maintain a tighter policy stance for longer if inflation remains persistent. This continuing uncertainty has been one of the factors contributing to the gradual rise in longer term government bond yields.
30-Year Government Bond Yields
Source: Bloomberg
But it isn’t just inflation, fiscal deficits and debt to GDP ratios continue to rise at the same time as private sector borrowing is rising sharply due to the AI capex spend.
Annual Issuance by Hyperscalers, Data Centres and Semiconductor Producers
Source: Bloomberg
Year to date issuance has already surpassed last year’s total. With demand for AI infrastructure continuing to grow, both investment spending and borrowing are expected to remain high.
Big Bucks Theory
Source: Bloomberg
Defence spending continues to rise as governments replace military equipment and invest in strengthening their defence capabilities. Combined with persistent fiscal deficits, this is likely to maintain upward pressure on government borrowing and bond yields.
Higher bond yields can be absorbed by markets if economic growth remains resilient. However, a more aggressive response from central banks to tackle inflation could create a more challenging environment for both bond and equity investors.
Attention is also turning to the U.S. midterm elections, now less than two months away. President Trump’s administration continues to pursue a range of trade, fiscal and foreign policy initiatives, although his approval ratings have drifted lower in recent months. The election outcome could have important implications for future policy direction and is likely to remain a key focus for investors.
Slump in Trump Economic and Inflation Approval Ratings
Source: BofA Global Investment Strategy, Bloomberg
We continue to maintain a well-diversified portfolio with exposure to technology, defence, mining, energy and healthcare. Within fixed income, we remain cautious and favour intermediate dated bonds. We believe this positioning leaves portfolios well placed to navigate a period of elevated market uncertainty and volatility.
The price and value of investments and any income that might accrue may fall as well as rise and is not guaranteed. You may not get back the amount of your original investment.
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Hear more from the Oakglen experts
Our investment team continue to provide interesting and informative content to help keep you in the loop on recent global news and market trends. See below for some key highlights from around the world which our investment team have also recently covered:
Read more:
- August 2026 Investment Summary
Jeff Brummette, Chief Investment Officer
- Quarter 2 2026 Investment Update
Jeff Brummette, Chief Investment Officer
- SpaceX’s $75bn Bet on the Future Faces a Reality Check
William Lamond, Investment Director
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