Video Inside the markets | Helping you guide clients

David Aujla narration: 

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Inside the markets | Helping you guide clients. David Aujla, Portfolio Manager, Multi-Asset Solutions. Data as at 31 August 2026. This video was recorded 16 September 2026. This video is for Professional Clients only and is not for consumer use.

Hello, and welcome to the August edition of Inside the Markets, a deeper look at how global markets have been navigating what remains a very eventful 2026.

My name is David Aujila, and I'm the lead portfolio manager for Invesco's Summit and Managed Multi-Asset Fund ranges and its modern portfolio service.

August was a positive month for markets overall, but the defining feature was actually the breadth of returns. Japan, emerging markets, Pacific ex Japan, and global smaller companies were among the stronger equity markets. US equities also rose, European equities made modest progress, and closer to home, UK equities were broadly flat. And that continued a theme seen throughout 2026, which was that of changing market leadership.

Market leadership has become less concentrated in August, while for the past few years, a small group of very large US technology companies has really dominated returns. In August, performance broadened across regions, sectors, and market capitalization. The AI theme, of course, remains important, but investors became much more selective about where the strongest returns from significant AI infrastructure spending will ultimately accrue.

Technology and AI-related shares were therefore volatile during the month as the focus shifted from the scale of the investment actually to the timing and distribution of eventual returns. And that was particularly relevant for semiconductor and hardware companies that already performed strongly earlier in the year.

Nevertheless, across the board, including those companies, corporate earnings remained supportive for markets.

The macro backdrop was shaped really by the continued tension between the US and Iran, and that kept a geopolitical premium in energy markets and revived concerns about supply and shipping through the Gulf.

Oil finished only modestly higher over the month, though. But that did mask considerable volatility, prices falling early in August as hopes of de-escalation improved and then going higher as prospects for a lasting resolution weakened. And that mattered because higher energy prices complicate the inflation outlook, just as central banks had hoped inflation would continue to fall.

The most important process in development, I think, was in the government bond markets. At the index level, fixed income returns were broadly flat, with government bonds and higher yield credit little changed, investment-grade credit emerging market debt slightly positive.

Those headline returns, though, concealed a significant repricing at the long end of the yield curve. Long-dated government bond yields rose sharply across the US, Europe, Japan, and of course, in the UK.

In the US, the 30-year treasury yield briefly reached 5.34%, which was its highest level since 2007. And that reflected more than expectations for the next central bank decision. Investors really are demanding more compensation for holding long-term debt amid persistent inflation uncertainty, sizable fiscal deficits, and heavy government issuance.

The UK, of course, was part of that move, and there was an additional domestic dimension to it. 10-year gilts stayed at or above 5% through much of August, while the 30-year gilt yield approached 5.8%. Inflation risk, government borrowing, and increasing attention on the UK fiscal outlook ahead of the autumn budget all contributed to that sensitivity.

Shorter maturity bonds were relatively insulated, with that coupon income pushing total returns overall and credit spreads remaining pretty contained. Central banks communication added uncertainty.

At Jackson Hole Federal Reserve Chair Kevin Warsh reiterated his determination to bring inflation under control but avoided offering a clear roadmap for the next move. And markets really interpreted those remarks as hawkish, bringing forward expectations of further Fed tightening.

More broadly, rate expectations have changed significantly this year. Earlier in the year, markets focused on when major central banks might begin cutting rates. By the end of August, investors were instead pricing further hikes from some of the major central banks.

The Bank of England was expected to remain on hold in the near term, but the possibility of tightening in the future has now returned to the agenda. 

Gold was indeed the standout asset, rising close to 10% in sterling terms. It benefited from geopolitical uncertainty, fiscal concerns that we've just mentioned, and periods of dollar weakness and of course, continuing central bank demand.

Overall, August reinforced the value of diversification. Equity participation broadened, credit remained resilient, and gold, as mentioned, just provided meaningful support.

Thank you for taking the time to watch this month's review. I hope you found it useful, and as ever, please do get in touch with any questions you may have. I'll see you next month.

Investment risks

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

Data as at 31 August 2026

This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

Views and opinions are based on current market conditions and are subject to change.