Market Review – August 2026

August proved a strong month for stockmarkets, supported by healthy economic data, robust company profits, and continued enthusiasm for artificial intelligence (AI). Fixed income (bond) markets had a tougher time, as inflation and borrowing concerns pushed yields higher before a late recovery.

August was generally a good month for equity markets, with performance supported by resilient economic data and strong company earnings. In the US, the S&P 500 Index (which tracks the 500 largest listed companies in the US) recorded solid gains and hit a record high, while the technology-focused Nasdaq Index (which tracks US technology and growth companies) performed even better, as AI-related investments remained a dominant theme.

Japan also performed well, supported by strong corporate earnings, share buybacks (companies buying back their own shares) and continued overseas investor interest. Asia ex-Japan and emerging markets recorded strong gains, helped by a recovery in technology shares and a powerful rebound in South Korea and Taiwan.

Europe and the UK produced more modest gains as investors balanced improved corporate earnings expectations against persistently high energy costs.

Bond markets experienced a difficult month, with long-dated government bond yields initially rising sharply as investors worried about inflation, fiscal deficits (governments spending more than they raise), the sheer amount of new government debt being sold and growing AI-related corporate borrowing requirements. The yield on 30-year US government bonds briefly moved above 5.3%, its highest level since 2007, while UK and German government bond yields also rose.

Sentiment improved in the US Treasury (US government) bond market later in the month, after Treasury Secretary Scott Bessent announced an expansion of government buybacks of its own long-dated bonds, which triggered a rally in government bond prices and temporarily eased concerns about market liquidity. Meanwhile, US Federal Reserve (Fed) Chair Kevin Warsh delivered a more “hawkish” – meaning he leaned towards keeping interest rates higher – speech than expected at the annual Jackson Hole meeting of central bankers, and described the Fed’s target of 2% inflation as “a firm, fixed target”.

Oil prices remained volatile in August, as tensions between the US and Iran persisted, but were only marginally higher by the end of the month. However, there was a sharp move higher in European natural gas prices, as gas inventories are low ahead of the coming winter months.

In commodity markets, gold and silver prices rallied strongly, as US Treasury market intervention rattled investors’ faith in the dollar. The US dollar weakened for the second month running in August.