Written by Dominic Williams
Most of the week’s attention was on the United States. On Friday, Kevin Warsh, the new Chair of the Federal Reserve, the US central bank, used his first Jackson Hole speech to make his position known: inflation remains too high, and interest rates may need to rise rather than fall. US inflation, as measured by the PCE index, the Fed’s preferred gauge, was stuck at 3.7% in July, keeping a September rate rise on the cards. Shares still rose. The S&P 500, a broad measure of large US companies, returned +0.9% and the technology-heavy Nasdaq 100 +0.8%. Nvidia, the world’s largest maker of artificial intelligence chips, saw its sales more than double compared to a year earlier and forecast growth well ahead of what analysts had expected, easing worries that AI spending might slow. Yet the advance was thin. The equally weighted S&P 500, in which every company carries the same weight regardless of size, slipped -0.1%. A handful of names did the work.
The market took Warsh at his word. Expectations for inflation and interest rates rose, US government bond yields, in effect the cost of government borrowing, climbed to their highest since early 2025, and investors now expect a 0.25% rise at the Fed’s next meeting. A renewed flare-up in the Middle East added to the pressure: oil jumped more than 3% over the bank holiday weekend, back above $90, after the US and Iran exchanged strikes.
Japan was the strongest major market. Inflation in Tokyo rose for a third month running, strengthening the case for a Bank of Japan rate rise as soon as September, yet shares still advanced +1.6%. Strong global demand for AI helped, as Japanese firms supply many of the components the technology depends on.
Emerging markets were more mixed than the headline return of +0.4% suggests. That figure comes from the MSCI Emerging Markets Index, which tracks larger companies across developing economies such as China, India, Taiwan and South Korea. Taiwan surged +3.4%, but South Korea fell -2.4%, giving back some of its extraordinary gains this year. The split underlines a risk: three companies, TSMC, Samsung and SK Hynix, now make up more than a quarter of the index, so its direction leans heavily on a single theme.
The week’s gains in equity markets rested on a few shoulders, and a brief dip in oil reversed the moment the weekend arrived. None of this is a reason to retreat, nor to chase the winners of the moment. It is why we stay invested across a wide range of regions, styles and asset classes, so that no single name or headline decides the outcome.
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