August largely preserved July’s benign market conditions, characterized by tight credit spreads, subdued volatility, and broad-based gains. Market breadth improved as the S&P 500 set new highs while megacap technology underperformed (+1.4%) and small caps advanced strongly; Japan and China outperformed, whereas Europe was comparatively subdued. Dollar weakness supported non-US assets and gold (+4.8%). Sentiment was underpinned by resilient macro data, a more dovish Federal Reserve tone, and robust US earnings (over 80% of S&P 500 companies beat expectations). Nonetheless, investor unease increased amid tariff uncertainty, softening US labor indicators, firmer inflation signals, and concerns over Federal Reserve independence, accompanied by a notable steepening of the US yield curve. Additional risks arose from fiscal strains in the United Kingdom and France. Given elevated valuations and rising yields, a period of consolidation appears probable in the near term; however, anticipated US rate cuts and AI-driven investment argue for a constructive medium-term outlook.

* July 2025