AUGUST 2026 FUNDHOUSE MARKET REPORT
This article has been prepared by Fundhouse and is reproduced by LifeMap Financial Planning for general information. It reflects Fundhouse's views as at the date of publication and those views may change. It does not take account of your individual circumstances and should not be treated as personal financial advice or a personal recommendation.
Economic commentary
In August, we learned that UK consumer prices rose by 2.9% in the year to July, up from 2.6% in June – the first increase in inflation since March. This was driven largely by higher gas and electricity costs following an increase in the Ofgem energy price cap, which reflected higher wholesale energy prices and ongoing disruption in global energy markets. Energy inflation can often lift expectations of higher interest rates as persistently high energy costs can feed into broader inflationary pressures, but the Bank of England (BoE) Governor Andrew Bailey emphasised that there is little evidence of these pressures feeding through. Bond markets began pricing in the possibility of an interest rate increase in Spring this year on the back of inflation worries, but armed with Bailey’s message, rowed back. This disconnect highlights the risk of forecasting short-term policy decisions and the frequent mismatch between market expectations and reality.
In the US, consumer price inflation rose by 3.4% in the year to July, down from 3.5% in June, as easing geopolitical tensions reduced energy prices, particularly gasoline, which carries a significant weight in the car-dependent US economy, unlike the UK where more persistent household energy costs continued to stoke inflation. Speaking for the first time at the annual Jackson Hole Economic Policy Symposium, Federal Reserve (Fed) Chair Kevin Warsh noted that inflation was moving in the right direction, but that progress towards the Fed's 2% target remained insufficient, with inflation having been above target for five years. The Fed could lower rates to support more borrowing, helping economic growth and the labour market, but it has declined to do so while it assesses the inflation outlook. August also saw an unusual intervention from the US Treasury, which announced new purchases (‘buybacks’) of longer-dated government bonds to ease pressure on borrowing costs. The move followed a rare joint intervention by US/Japanese authorities to support the value of the yen (the first such operation since 1998); with Japan being one of the largest holders of US government debt, policymakers were keen to avoid disorderly currency moves that could have resulted in US government bond sales and further upward pressure on US borrowing costs. The buyback announcement brought some near-term relief, but this proved insufficient, and concerns over persistent inflation, Iran, and borrowing costs ultimately prevailed.
Market commentary
Global equity markets advanced through August as resilient economic data and stronger-than-expected corporate earnings supported investor confidence. Emerging markets were among the strongest performers, led by Taiwan's technology-heavy market. US equities also performed well as investors renewed their exuberance for companies expected to benefit from the growth of AI. However, gains were again concentrated among a relatively small group of companies, suggesting investors are beginning to discern between perceived winners and losers in the AI race. AI/tech-related ‘growth’ stocks in Europe were also buoyed, although the region's limited exposure to large tech companies meant it was a laggard.
Global bond markets, in aggregate, generated modest gains, as corporate bonds outperformed government bonds. US Treasuries were up slightly as investors weighed resilient economic data against persistent inflation, high government debt, and rising borrowing costs. Buybacks provided some support, reflecting growing concern about the sustainability of government borrowing as bond yields have risen globally. UK gilts were mixed but eked out a small gain as easing inflation fears and the absence of any major policy announcements from the new prime minister marginally outweighed rising energy prices and fiscal uncertainty.
Outlook. History shows that trying to successfully identify long-term beneficiaries of major technological shifts is unwise, with many early leaders failing to maintain their advantage. Rather than attempting to predict the eventual winners, or the timing of economic signals like interest rate moves, we remain focused on the underlying market fundamentals and valuation signals that drive long-term investment outcomes. The renewed momentum behind the AI trade has further extended valuations in some areas of the market, increasing the importance of valuation selectivity; accordingly, we continue to seek diversified exposure to attractively valued areas of the market where we believe the risk-reward trade-off remains favourable, while limiting exposure to the risks that can emerge when market enthusiasm becomes excessive.
Fundhouse is the trading name of Fundhouse Bespoke Limited. Fundhouse provides investment management services to professional clients and does not provide financial advice. Importantly, this note does not represent investment advice and any reader should always speak to their financial adviser before making any investment decisions. Please note that the value of any investment may go down as well as up and you may lose capital when investing and the value of your investments may not always increase. Please ensure that you are comfortable bearing financial losses and that you are comfortable taking a long-term investment view of five years or more.
