Markets were broadly positive in August, led by emerging markets, Asia ex Japan and the US, where technology, AI investment, strong corporate profits, and higher commodity prices supported returns. Eurozone and Japanese equities also rose, while UK equities made a smaller gain.
Global bonds remained under pressure as inflation, energy prices and interest rate uncertainty pushed yields higher and prices lower.
Commodities performed strongly, led by agriculture, while oil benefited from Middle East tensions and gold from demand for safer investments.
US
US equities rose during the month, supported by better-than-expected company profits and continued enthusiasm for businesses benefiting from AI and digital infrastructure.
Energy, technology and materials performed best, while utilities and industrial companies fell behind. Energy benefited from higher oil prices, while higher bond yields reduced the appeal of defensive sectors such as utilities.
Eurozone
Eurozone equities moved higher, led by technology, communication services and financials. Software performed particularly well, while defensive areas such as real estate, utilities and consumer staples fell.
Inflation remained above the European Central Bank’s 2% target, supporting expectations of a possible interest rate rise in September. Economic activity improved slightly, with manufacturing showing signs of strengthening.
UK
UK equities rose slightly in August but fell behind other markets. Basic materials performed best, while healthcare, energy and companies selling everyday essentials fell. Smaller companies performed better overall.
The UK economy grew during the second quarter, but inflation increased in July, partly because of higher energy costs.
Emerging Markets
Emerging Market equities rose in August and outperformed developed markets. Technology stocks, a weaker US dollar and stronger commodity prices supported returns, although Middle East tensions and rising bond yields created uncertainty.
South Africa, Taiwan and Korea performed particularly well, while India, China and Brazil fell behind due to concerns about oil prices, economic growth and high valuations.
Asia ex-Japan
Asia ex-Japan equities rose in August, supported by continued investment in technology and strong demand for semiconductors linked to AI. Materials, healthcare and technology performed best.
Taiwan and South Korea benefited from their important roles in semiconductor production, while Singapore was helped by strong banks. China and India fell slightly as concerns about economic growth, oil prices and higher bond yields weighed on markets.
Japan
Equities were positive in August, despite uncertainty around US interest rates, Middle East tensions and efforts to support the yen. Better-than-expected company results boosted confidence.
AI-related shares gained on continued investment in technology infrastructure, while banks benefited from expectations of further interest rate rises in Japan.
Global Bonds
Global bond markets remained under pressure in August. Income rose and prices fell as inflation stayed high, energy prices remained elevated and investors remained uncertain about future interest rate decisions.
Long-term borrowing costs also increased across the US, Europe, the UK and Japan. Higher-quality corporate bonds were broadly stable, supported by strong company finances. However, higher interest rates, heavy borrowing and geopolitical risks remained concerns. Bond yields continued to offer attractive income.
Commodities
Performed strongly in August, led by agricultural products. Concerns about El Niño (a natural weather pattern that can bring droughts or heavy rainfall) raised fears of crop damage and tighter food supplies.
Attacks on agricultural exports from Russia and Ukraine added to these concerns. Oil prices remained high amid ongoing Middle East tensions, while gold benefited as investors sought a safer place to hold their money.
Please note
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Production