Global Market

August 2026 saw global markets recover from July’s weakness, supported by resilient economic activity, strong corporate earnings and renewed momentum in technology stocks. Risk sentiment improved across most major equity markets, while a weaker US dollar provided additional support to emerging market assets and commodities. However, geopolitical tensions in the Middle East remained elevated, and persistent inflation pressures continued to keep government bond yields relatively high as investors reassessed the outlook for further monetary tightening.

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Global equities posted broad-based gains during the month. The S&P 500 rose 2.7%, supported by a strong second-quarter earnings season and a recovery in technology and AI-related stocks following July’s sharp sell-off. Nvidia gained around 10% after another strong earnings report, although performance among large technology companies remained mixed. Gains also broadened beyond mega-cap stocks, with small caps performing well as economic data remained resilient. Japan’s TOPIX rose 3.9%, while emerging market equities gained 3.4% in US dollar terms, helped partly by a weaker dollar and renewed strength in Asian technology stocks. Chinese equities were comparatively subdued as economic data continued to highlight weakness in domestic demand.

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Commodity markets generally strengthened in August, although performance varied across sectors. Brent crude remained around the $90 per barrel level as continued tensions between the US and Iran maintained concerns over potential supply disruption, while European natural gas prices rose amid low inventories and disruption to energy infrastructure. Precious metals performed particularly strongly, with gold rising almost 10% as a weaker US dollar, strong investment demand and renewed concerns over US fiscal sustainability supported prices. Industrial metals also advanced, while agricultural commodities strengthened amid geopolitical and weather-related supply concerns.

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Global fixed income performance was more mixed as government bond markets remained sensitive to inflation, energy prices and central bank expectations. The Bloomberg Global Aggregate Bond Index returned around 0.5% in US dollar terms, while the US 10-year Treasury yield ended August at approximately 4.75%. Shorter-dated US yields moved higher following hawkish comments from Federal Reserve Chair Kevin Warsh at Jackson Hole, while longer-dated yields received some support from the US Treasury’s announcement of expanded bond buybacks. European and Japanese government bonds came under greater pressure as expectations for further monetary tightening increased, while credit markets performed more strongly as high-yield spreads narrowed amid improved risk sentiment.

As of 31 August 2026:

UK 10 Year Gilt Yield 5.070% (28th August)
US 10 Year Treasury Yield 4.756%
Germany 10 Year Bund Yield 3.339%

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UK Market

UK equities delivered modest gains in August but lagged the stronger recovery across global markets. The FTSE All-Share rose around 0.7%, while performance varied significantly across market segments. Large-cap equities were broadly flat, whereas the more domestically focused FTSE 250 performed more strongly. This marked a reversal from July, when the UK had benefited from its relatively low exposure to technology stocks. In August, renewed strength in global technology and growth stocks instead favoured markets such as the US and parts of Asia, while the UK’s more value-oriented sector composition provided less support.

The domestic macroeconomic backdrop remained challenging. Annual CPI inflation rose from 2.6% in June to 2.9% in July, reinforcing concerns that inflationary pressures were proving more persistent than previously expected. Higher global energy prices also remained a risk to the outlook through their potential impact on household utility bills, transport costs and business input prices. The combination of persistent inflation and relatively weak domestic growth continued to complicate the outlook for further monetary easing.

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Gilts generated modestly positive returns during August, although longer-term yields remained elevated. The 10-year gilt yield ended the month at around 5.1%, broadly unchanged from the end of July, as concerns over inflation and higher global bond yields were balanced by a softer domestic growth outlook. With UK inflation moving higher and the Bank of England maintaining a cautious approach to rate cuts, gilt markets remained sensitive to incoming inflation data, energy prices and expectations for the future path of Bank Rate.

Ark Insight

August’s rebound in technology and growth stocks, following July’s sharp rotation into value, highlighted how quickly market leadership can change. At the same time, broader gains across small caps and emerging markets suggested that investor confidence was not limited to a narrow group of large US technology companies.

Looking ahead, investors will continue to monitor the interaction between inflation, central bank policy and geopolitical risks. Persistent inflation and elevated energy prices could keep interest rates higher for longer, while government bond markets remain sensitive to changes in policy expectations. Nevertheless, resilient corporate earnings and economic activity continue to provide support for risk assets.

In this environment, maintaining a diversified portfolio across regions, sectors and asset classes remains important. The contrasting market leadership seen across July and August reinforces the risks of excessive concentration in a single investment theme. With valuations elevated in parts of the equity market and bond yields still high, disciplined portfolio construction and active risk management remain important.

As always, your advisers would be happy to assist with any questions you may have.