Earnings Support, but Risks are Rising
US Equities
The Nasdaq gained 3.6%, the S&P 500 rose 2.5% and the Dow added 1.4% in August. Markets reached record highs during the month before surrendering part of those gains as rate expectations changed. Strong earnings remain supportive, but elevated valuations and the prospect of higher rates leave many growth-oriented companies vulnerable to shifts in investor sentiment.
What this means for investors: US equities remain an important source of long-term growth, but quality, cash generation and diversification beyond expensive market leaders are essential.
UK and European Equities
Germany's DAX gained 2.5% and reached a record high, while France's CAC 40 fell 2.1%. The FTSE 100 declined 0.4% after briefly approaching record territory during a rotation from US technology into more traditional UK sectors.
Regional resilience should not obscure the policy challenge. Higher inflation gives central banks less flexibility, while modest growth and fiscal pressure may continue to affect sentiment.
What this means for investors: We favour high-quality, cash-generative businesses and remain selective where valuations depend heavily on rapid policy easing.
Asia and Japan
Japan recovered in August, with the Nikkei 225 gaining 3.0%. A weaker yen continues to support exporters, but it also raises import costs and adds to inflation pressure. China remained mixed: the Shanghai Composite gained 4.0%, while the Hang Seng declined 1.4%. This divergence reflects the contrast between export strength and weak domestic activity. Across Asia, technology, semiconductor and export-related opportunities remain attractive, but economic and policy outcomes vary materially by market.
What this means for investors: Regional and company selection remains crucial, with currency, policy and domestic-demand risks assessed alongside long-term growth potential.
South Africa: Resources Drive the Market
The FTSE/JSE All Share Index gained 4.3% in August, but performance was highly concentrated. Resources rose 25.4%, supported by Northam corporate action and strong gold and platinum-group-metal prices. Beyond resources, the picture was far less positive. Industrials fell 5.8%, property declined 3.9% and financials lost 1.7%. Headline inflation slowed to 4.3%, although core inflation remained sticky at 4.2% and the official unemployment rate increased to 33.6% in the second quarter of 2026.
What this means for investors: Local assets continue to offer opportunities, but August demonstrated why sector diversification matters and why index-level returns can conceal very different underlying outcomes.
Commodities: Diversification in Action
August reinforced the role of commodities in diversified portfolios. Rising gold and platinum-group-metal prices, together with the Northam corporate action, drove exceptional returns in South African resources. The longer-term case for measured commodity exposure remains supported by geopolitical uncertainty, supply constraints and persistent inflation risk. Commodity performance can vary significantly across sectors and over time, reinforcing the need for diversified exposure.
What this means for investors: Commodities can provide diversification and inflation sensitivity, but exposure should remain measured, diversified and aligned with long-term portfolio objectives.
Portfolio Positioning for the Months Ahead
While market forecasts remain uncertain, portfolio construction does not need to depend on predicting every policy announcement or economic outcome. We believe investors should focus on portfolios designed to remain resilient across a range of possible scenarios.
Quality Remains Important
Higher interest rates and a more selective environment tend to favour businesses with strong balance sheets, resilient earnings and consistent cash generation. We continue to favour quality companies that can adapt to changing conditions rather than businesses whose valuations depend heavily on lower interest rates.
Fixed Income Still Has a Role
Bonds continue to support diversified portfolios by providing income and helping to manage overall portfolio risk. However, investors should remain selective when taking duration risk while inflation and interest-rate expectations remain uncertain.
Diversification Matters More Than Ever
August demonstrated that market returns can be concentrated in unexpected areas. South African equities advanced strongly, but performance was driven primarily by resources. Diversification across regions, sectors and asset classes remains one of the most effective ways to manage uncertainty.
Commodities Continue to Provide Balance
The strong performance of gold and platinum-group metals highlighted the role commodities can play in diversified portfolios. While returns can be volatile, measured commodity exposure may provide diversification in an environment of geopolitical risk, supply constraints and persistent inflation.
Patience and Discipline Remain Essential
Periods of uncertainty can create opportunities for long-term investors. Rather than reacting to short-term market movements, investors are best served by maintaining a disciplined process, remaining diversified and focusing on long-term objectives.
