Global Perspectives
Investor sentiment remained resilient in August, supported by data showing that global economic activity continues to hold up while inflation trends remain under control. Despite downbeat US labour market releases and concerns around the commercial impact of artificial intelligence (AI), equity and bond markets delivered broadly positive results.
The MSCI All-Country World Index advanced 2.5% (USD) in August and has gained 14.16% (USD) YTD, while the Bloomberg Global Aggregate Bond Index gained 1.5% (USD). Developed market equities returned 2.6% (USD), with healthcare stocks rebounding strongly (+5.4% MoM, USD), and small-cap equities outperforming larger peers. In contrast, technology underperformed as markets reassessed the immediate returns on AI investment.
Commodities painted a mixed picture: gold rose 4.8% (USD), crude oil declined 6.1% (USD) to settle around US$68/bbl, while natural gas eased as global supply remained healthy. The US dollar weakened for the seventh time in eight months, with the Dollar Index falling 2.2% in August, extending its year-to-date decline to 10%.
United States
The S&P 500 has gained 10.80% (USD) year to date and the S&P 500 index rose 2.0% (USD) for the month of August, supported by better-than-expected second-quarter earnings, with three-quarters of companies beating forecasts by the widest margin since 2021. Small caps surged (Russell 2000 +7% MoM, USD) as investors priced in near-term Fed easing. Labour market weakness dominated headlines. July’s non-farm payrolls data revealed downward revisions, leaving average monthly job growth at just 35,000 over three months – far below healthy trend levels. At the Jackson Hole symposium, Fed Chair Jerome Powell acknowledged the balance of risks had shifted, hinting at a September rate cut. Markets now price in a 25bps reduction in the fed funds rate.
Politics added uncertainty. President Trump dismissed the head of the Bureau of Labour Statistics after the weak jobs data and attempted to remove Fed Governor Lisa Cook, raising concerns over central bank independence. The dollar softened, while Treasury yields steepened as investors demanded higher long-term risk premiums.
United Kingdom
The FTSE All-Share advanced 10.80% (GBP) year to date and gained 0.9% (GBP) in August, underperforming global peers. Inflation surprised on the upside in July, and although the Bank of England cut its policy rate by 25bps, the accompanying hawkish tone reduced market expectations for further easing. A weakening labour market and fragile consumer confidence weighed on sentiment.
Europe
The MSCI Europe ex-UK index gained 10.17% (EUR) year to date and rose 1.2% (EUR) for August. Eurozone PMI data signalled expansion, reaching 51.1 in August, driven by manufacturing strength. Loan growth also remained robust. French political risks unsettled investors. Prime Minister Attal called a vote of no confidence, triggering market volatility. The CAC 40 declined 0.9% (EUR), dragging on regional returns given France’s 20% weight in European indices.
Asia
Japan stood out as the best-performing developed market. The TOPIX surged in local terms following the US-Japan trade deal and solid domestic data. GDP grew 0.3% QoQ in Q2, while machinery orders – a bellwether for capex – rose 3% MoM. China continued to drive emerging market sentiment. Beijing announced ambitious plans to triple chip supply by 2026, boosting technology shares. The US and China extended their trade truce until November, reducing near-term trade risks.
Emerging Markets
The MSCI EM Index advanced 1.5% (USD) in August and is now up 19.7% year-to-date. Chinese equities, particularly those listed in Hong Kong, gained 26% YTD, remaining the key driver of EM performance.
However, challenges emerged elsewhere. South Korean equities were hit by tax reforms, while India faced a sharp setback after the US imposed a 50% tariff on imports, targeting its purchases of Russian oil.
South Africa
South African equities extended their winning streak with a sixth consecutive monthly gain, as the FTSE/JSE Capped SWIX Index rose 3.5% (ZAR) in August, bringing year-to-date returns to 22.3% (ZAR). Gold miners once again dominated performance, climbing 22% (ZAR) and accounting for the bulk of the JSE’s monthly and year-to-date gains, supported by the 4.8% (USD) rise in the gold price. Among individual stocks, Curro surged 34% after Jannie Mouton’s charitable foundation launched a R7.2bn bid to delist the company and convert it into a non-profit organisation, On the macroeconomic front, headline inflation rose to 3.5% YoY in July, its highest level in nearly a year, driven by rising food prices. Despite this uptick, South Africa’s 10-year borrowing rate eased to 9.6% p.a., close to a four-year low, aided by falling global yields. The rand strengthened 3.2% (ZAR) against the US dollar during the month, leaving it 6.7% higher year-to-date
Looking ahead & House view
The outlook for September will hinge on the Fed’s policy decision, the French parliamentary vote, and ongoing US-China trade negotiations. With equity valuations above long-term averages, especially in the US, market gains may be harder to sustain without fresh positive catalysts. Tariff pressures remain a potential source of renewed inflationary pressure.
We remain cautiously constructive on global markets. Resilient activity, moderating inflation, and central banks shifting towards easing provide near-term support. However, political risks, trade frictions, and questions over central bank independence could challenge sentiment.
We continue to advocate for diversified portfolios, balancing exposure not only across asset classes but also across regions, sectors, and currencies. While the US remains the anchor of global equity markets, opportunities are broadening beyond mega-cap companies, with compelling growth prospects emerging globally
As always, we continue to actively manage our clients’ investment portfolios to ensure they are best positioned to benefit from current market conditions, driving long-term growth while carefully mitigating unnecessary risks.
