Written by Chris Ayton
Last week, global equity markets gave up some of this year’s healthy gains with the MSCI All Country World Index (a broad measure of global stock markets) down -1.4%. The ongoing conflict in Iran and its impact upon commodity prices, future inflation and future interest rates remained at centre stage.
Oil prices rose over the week as the stalemate in the US-Iran conflict continued to disrupt the supply of oil from the Middle East. The broader Bloomberg Commodity Index, which tracks a broad basket of key commodities, rose +3.8% in Sterling-hedged terms over the week as commodities continued to provide robust inflation protection for portfolios.
US Treasury Secretary Scott Bessent surprised markets by revealing plans to more than double the Treasury’s purchases of long-term US government bonds. This move was an attempt to reduce the US government’s long-term borrowing costs after these hit a 20-year high earlier in the week. Such high borrowing costs are problematic at a point where the US government’s debt pile is extremely high and showing little sign of coming under control. These long-term interest rates are also used to set the rates on mortgages in the US and, combined with high oil prices, aren’t helping public sentiment at a point where the mid-term elections in the US are approaching and President Trump’s approval ratings are at an all-time low. The S&P 500 index of US companies fell -2.0% over the week.
Japanese bond yields also hit a three-decade high as analysts fear inflation in Japan will accelerate because of high commodity prices and a weak Yen (which makes imports more expensive), both of which lead analysts to believe that the Bank of Japan will be forced to raise interest rates again in September. Japanese equities did not react well to this backdrop with the MSCI Japan Index down -3.9% over the week.
In the UK, there was a whole raft of economic releases over the week. The latest UK Services Purchasing Managers’ Index suggested Britain’s service sector, which is critical to its economy, unexpectedly strengthened in August. This positive picture was backed by news that consumer confidence had risen to its highest level since August 2024 and a gauge of British factory orders also reached its highest level since November 2024. It wasn’t all good news though as, despite record self-assessed income tax receipts, even higher government spending meant UK government net borrowing was still higher than expected. This further highlights the challenges that face new UK Chancellor, John Healey, when he delivers his first budget in October. Nevertheless, the UK equity market still edged out a small positive return over the week (FTSE All-Share Index +0.5%), significantly aided by its meaningful exposure to oil and other commodity-focused companies.
With global events continuing to create uncertainty, our portfolios remain well diversified and positioned to navigate changing market conditions.
All performance figures are stated in Sterling terms, unless otherwise specified.
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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 24th August 2026.
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