Prabhdeep Gill
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Market Commentary: Monthly Bulletin August 2026
A Review of August 2026
Key Points
(All figures are based on bid‑bid prices with income reinvested unless otherwise stated)
Markets Bounce Back, Led by Asia and Emerging Markets
After July’s wobble, confidence returned in August and almost every major market rose. The strongest performers were the very areas that had struggled the month before: Asia (excluding Japan) gained 3.55% and Emerging Markets 3.33%, reclaiming their place at the top and remaining well ahead for the year to date. A big driver was the recovery in Asia’s technology manufacturers, the South Korean and Taiwanese firms that make the advanced computer chips powering artificial intelligence, which steadied after a sharp fall in July.
Strong company results helped too, a standout set of figures from the US chip giant Nvidia rounded off an excellent earnings season, reassuring investors that the AI boom is translating into real profits. Japan also had a good month, rising 1.87%. Emerging markets enjoyed their strongest August in over two decades, a striking turnaround from only a few weeks earlier.
A Weaker Dollar Reshapes Returns
One of the quirks of the month was that the US market did well in its own currency, with the main US index rising around 2.7%, yet UK investors saw almost none of that, with US shares up just 0.32% once converted into pounds. The reason was a weaker US dollar, a recurring theme this year. When the dollar falls, the value of American investments shrinks when translated back into sterling; at the same time, a softer dollar tends to flatter returns from emerging markets, adding to their strong month. For a UK-based, globally diversified investor, currency movements like these can matter just as much as the share prices themselves.
Jackson Hole and ‘Higher for Longer’
The main event for markets was the US Federal Reserve’s annual gathering at Jackson Hole, where its Chair (Kevin Warsh) struck a firmer tone on inflation. Rather than hinting at the interest rate cuts investors had hoped for earlier in the year, the message was that rates may need to stay high or even rise for as long as inflation remains above target, with ongoing Middle East tensions and oil hovering around $90 a barrel keeping price pressures alive.
Government bond yields rose in response, reflecting expectations that borrowing costs will stay elevated, and were nudged higher still by concerns over how much governments are having to borrow. Higher for longer interest rates remain a headwind for bonds and for the more expensive parts of the market and are something we continue to factor into how portfolios are positioned.
Portfolio Positioning and Rebalancing
During August, we also undertook several portfolio rebalancing changes across our model portfolios. Firstly, as daily cashflow built up, we redeployed capital into areas where we see attractive long term return potential.
Secondly, we reduced cash levels from 4.5% across all funds down to 3.0% in the Adventurous fund, 3.5% in the Balanced fund and 4.0% in the Cautious fund. The monies were added to existing defensive positions in Ninety One Diversified Income and Jupiter Merian Global Equity Absolute Return funds.
Finally, we reduced exposure slightly to UK equities, and to a lesser extent global equities, with monies reallocated to our fixed interest holdings, benefiting from equity profits year to date.
This reflects our ongoing commitment to the theme this year of protecting capital whilst participating in market opportunities. The changes ensure portfolios remain aligned with their strategic asset allocations while retaining sufficient liquidity to respond to changing market conditions. By maintaining this disciplined approach to rebalancing, we aim to keep portfolios appropriately positioned to navigate periods of uncertainty while continuing to benefit from long-term market growth.
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