August was a strong month for risk assets, after the bull market in equities for 2026 was disrupted in July. Federal Reserve chair Kevin Warsh used his Jackson Hole address to flag inflation as the primary risk for the board, which was taken by the market as hawkish. Tensions between the US and Iran flared late in the month, while persistent US fiscal deficits and a national debt exceeding forty trillion dollars kept bond investors on edge. These concerns were offset by a strong earnings season for US stocks, particularly for those within the AI value chain such as NVIDIA, which reported revenues of $96bn, beating expectations.
Global equities extended their advance, with the broad ACWI index up 1.9% over the month in sterling. Regionally, emerging markets were strongest, up 2.8%, with AI value chain names based predominantly in Korea recovering after the previous month’s sell-off. Value stocks continued to outperform, our holdings in sector-neutral value strategies such as World Value, US Value and emerging market value were all strong relative to the broad market, up 4%, 5.5% and 6.3% respectively.
Bond market returns were more muted, with broad indices ending the month roughly flat. Persistent fiscal deficits and heavy Treasury issuance kept upward pressure on longer-dated yields, even as short-term rates held steady. US Treasury Secretary Scott Bessent announced an increase in the Treasury buyback programme in response of this move in long-bonds, however, the impact proved fleeting and raised some concerns about monetisation of government debt.
Within alternatives, gold extended its rally, rising more than ten per cent in August as ongoing concerns over debt sustainability and Bessent’s actions led investors to worry about currency debasement. Our holding in Gold Miners also rallied, up 37% during the period. We added to our position in Gold over the month, which continues to act as an effective diversifier against currency debasement and heightened geopolitical risk.
