Investment Update August 2026
- ABP Team
- 4 days ago
- 5 min read
Updated: 3 days ago
Key Highlights:
U.S. equities faced sharp technology and semiconductor volatility, with the S&P 500 recording its first July decline in over a decade.
U.S. corporate earnings generally exceeded expectations, with 85% of reported results beating forecasts.
Artificial intelligence and cloud infrastructure remained key themes, although results varied across companies.
U.S. Treasuries weakened as persistent inflation, elevated energy prices and Federal Reserve uncertainty pushed longer-term yields higher.
Treasury yields ended the month at 4.29% for two years, 4.74% for ten years and 5.28% for thirty years.
Japanese equities finished lower amid technology weakness, rising bond yields and currency movements.
European equities remained resilient, supported by generally positive corporate earnings and easing inflation, with the STOXX Europe 600 staying near record levels.
Europe remained energy dependent as Russian gas supplies were replaced by a U.S. contract, while GDP growth was projected at 1.2%.
UK equities performed well as inflation eased to 2.6% and the FTSE 100 remained above 10,000.
UK markets benefited from significant global energy, financial and mining exposure, while recent political change was initially received positively.
Emerging Markets experienced semiconductor-led volatility, particularly in South Korea, before sentiment improved following stronger U.S. technology earnings. The People’s Bank of China continued adding liquidity, while CXMT surged 466% on its STAR Market debut, reaching approximately $490 billion in market capitalisation.
At portfolio level, positioning remained in favour of risk assets as technology consolidated and market participation broadened.
Isn’t summer supposed to be a quieter time, allowing for holidays and a chance for thoughtful reflection? Not so in 2026. July brought heightened volatility to the technology sector, particularly among semiconductor stocks, culminating in the first July in a decade in which the S&P 500 declined. Of course, there is much more to the story, and several positive developments may have gone unnoticed by many investors. Let’s explore the key details in the update that follows.
US equities experienced a volatile July as investors navigated shifting expectations for interest rates, mixed economic data, and significant swings within the technology sector and ongoing geopolitics. Semiconductor stocks came under pressure for much of the month, prompting a rotation away from some of the market’s strongest performers, while concerns over inflation and Federal Reserve policy added to uncertainty. Despite periods of sharp weakness, strong corporate earnings from several technology leaders helped support a late-month recovery. Even so, the S&P 500 finished July modestly lower, its first July decline in more than a decade.
The chart attributes volatility in US equities during July.
The US corporate earnings season has generally exceeded expectations so far with 85% of those announcing results beating expectations. Several large technology companies delivered strong results and reinforcing confidence in continued investment in artificial intelligence and cloud infrastructure. Meta has been the one exception so far. Microsoft’s results were particularly well received, although earnings outcomes have been more mixed across sectors, highlighting a growing divergence between companies successfully monetising AI and those still facing pressure on margins and cash flow.
US Treasuries experienced a challenging month as concerns over persistent inflation, elevated energy prices, and uncertainty surrounding Federal Reserve policy pushed long-term yields higher. The Fed’s decision to leave interest rates unchanged prompted a steepening of the yield curve, with shorter-dated yields easing while longer-dated yields rose sharply. By month-end, the 30-year Treasury yield had reached its highest level since 2007, while the 10-year yield posted its largest monthly increase since March, resulting in negative returns for many longer-duration government bonds.
At the 29 July FOMC meeting, Mr Kevin Warsh (new Federal Reserve Chair, photographed adjacent) declared "there is no soft inflation target, not on this committee's watch," yet the bond market responded with an immediate sell-off, pushing the 30-year Treasury to a 19-year high of 5.23%.
By month-end the Treasury yield curve read: 2-year 4.29%, 10-year 4.74%, 30-year 5.28%, a pronounced steepening, a dynamic we have been highlighting in our recent publications.
Japanese equities endured a volatile July too, with the Nikkei 225 pressured by sharp swings in technology and semiconductor shares as investors reassessed the outlook for artificial intelligence-related spending. Rising bond yields and currency fluctuations added to market uncertainty, although broader market participation remained more resilient than headline index moves suggested. A strong rally at month-end, supported by renewed optimism around global technology earnings, helped recover some losses, but the Nikkei still finished the month lower overall. We note concerns around levels of the Yen with US Treasury support helping to support Japanese policy and effectively shore-up the carry trade.
Meanwhile European equities delivered a resilient performance, supported by generally solid corporate earnings and renewed enthusiasm for technology stocks linked to artificial intelligence. While markets faced headwinds from higher energy prices, trade tensions, and uncertainty over the outlook for interest rates. The EU cancelled its supply of Russian gas, taking a replacement contract with the United States. Europe remains energy dependent. The European Commission projected full-year GDP growth of just 1.2%. The STOXX Europe 600 remained near record levels during the month whilst inflation eased and pressure on interest hikes moderated.
Back home in the UK, domestic equities performed well in July relative to other markets as domestic inflation eased to 2.6%. The index benefited from its significant exposure to global energy, financials and global mining companies, sectors that proved relatively resilient compared with technology-heavy markets elsewhere. The FTSE 100 held above the 10,000 level throughout the month, exhibiting notably lower volatility than the S&P 500, a reflection of the index's defensive sectoral composition and its relative insulation from the semiconductor-driven swings that characterised US markets.
The political revolving door at 10 Downing Street delivered a new resident and, at least in the short term, markets were enthusiastic.
The chart highlights South Korean equities’ volatility.
Emerging Markets were adversely affected by extreme volatility in July, as investors reassessed the outlook for artificial intelligence-related semiconductor demand and growing competition from Chinese chipmakers. Heavy selling in market leaders Samsung Electronics and SK Hynix triggered sharp declines in the KOSPI during the month, although sentiment improved significantly at month-end following strong US technology earnings that reignited confidence in the long-term AI investment cycle. It should be noted falls in semi-conductor stocks followed a parabolic upturn and is representative of normal stock over exuberance followed by consolidation – particularly in a narrow market where a handful of stocks drive daily movements. July highlighted both the opportunities and risks associated with South Korea’s heavy dependence on the semiconductor sector. The People’s Bank of China continued adding liquidity which is positive for risk assets. Chinese memory chipmaker CXMT debuted on Shanghai's STAR Market, soaring 466% on its first trading day to become China's most valuable listed company at approximately $490bn market capitalisation. The listing crystallised China's domestic semiconductor ambitions.
At portfolio level, we kept our powder dry during July as markets jockeyed for position and whilst the critical backdrop remains broadly positive and supportive of our strategy. Equity markets have broadened out quite significantly as technology stocks consolidate and other industries play catch up. This, of course, is a sign of health. Portfolios remain adjusted in favour of risk assets as we consider further upside potential ahead of the November mid-term elections in America.
As ever, we thank investors for their commitment, and we look forward to answering any questions you may have.
