August 2026
Markets pick their battles
August was a relatively straightforward month for markets. Volatility drifted lower and most developed equity markets made steady progress, despite investors having no shortage of issues to contend with. There were some notable exceptions. Bitcoin rallied 22.6%, silver fell almost 11%, and the gap between the strongest and weakest-performing assets was considerably wider than the headline equity indices suggested.
Trump continued to dominate the airwaves. Tariffs, Iran, energy policy, crypto and his continuing criticism of the Fed ensured markets were never short of headlines. Markets still reacted, but increasingly focused on the likely economic consequences rather than the political theatre. Investors appeared more willing to distinguish between negotiating tactics and policies capable of affecting earnings, inflation or interest-rate expectations.
Iran remained unresolved. June removed much of the immediate geopolitical premium from oil markets. August showed that was not the same as resolution. Developments in the Middle East continued to be assessed individually rather than provoking broad market reactions, but nobody was prepared to conclude the risks had disappeared. At the same time, relations between the US and China remained strained. Tariffs, trade and technology restrictions continued to shape the relationship, providing another reminder that geopolitical tensions remain firmly embedded in the investment backdrop.
Oil reflected that balance. Brent slipped 2.5% and WTI fell 1.3%, suggesting markets had become more comfortable with supply expectations despite continued geopolitical uncertainty. Trump’s emphasis on expanding US energy production added to that backdrop, while lower crude prices also helped support the gradual improvement in the inflation picture.
Inflation continued to edge lower across most developed economies, although central banks remained cautious about declaring victory. The Fed stayed under regular political pressure from Trump, but policymakers continued to focus on incoming economic data rather than political rhetoric. Markets became increasingly comfortable with the prospect that interest rates could remain higher for longer if growth and employment continued to prove resilient, reducing expectations of an imminent easing cycle.
Against that backdrop, most developed equity markets quietly made further progress. The S&P 500 gained 2.6%, the Nasdaq rose 3.9%, Germany’s Dax advanced 2.5% and Japan’s Nikkei 225 added a further 3.0%, extending one of the strongest performances among the major developed markets this year. The FTSE 100 was the notable exception, slipping 0.4%. Its more defensive composition and greater exposure to commodity-related businesses left it trailing many of its international peers.
China remained the weakest of the major markets. The Shanghai Composite fell 2.2%, reflecting continued concerns over domestic growth and an external environment that remains complicated by difficult relations with Washington. Policymakers continued to provide targeted support, but investors remained cautious about the pace and durability of any recovery, leaving Chinese equities out of step with much of the developed world.
The discussion around artificial intelligence also became more measured. July had raised concerns about valuations and the scale of investment flowing into the sector. August’s rebound suggested confidence remained intact, but investors paid closer attention to whether the substantial capital expenditure being committed by the world’s largest technology companies would ultimately translate into earnings growth. The debate shifted from whether AI would reshape the economy to how quickly companies could demonstrate returns on that investment.
Commodity markets were otherwise relatively subdued. The Bloomberg Commodity Index rose 5.0%, masking some significant differences beneath the surface. Gold edged 1.2% lower, while silver fell almost 11%, making it one of the month’s weakest-performing major assets. Precious metals no longer carried the same urgency as they had earlier in the year, even if geopolitical risks remained firmly on investors’ radar.
Bitcoin provided the month’s standout performance, rising 22.6%. A more supportive political backdrop in the US, renewed institutional interest and improving sentiment towards digital assets all helped support a strong recovery after a difficult summer. The rally also demonstrated that, while investors had become more selective in many parts of the market, conviction remained strong where they believed the long-term investment case continued to improve.