Content

• UK: Inflation increased and markets lagged, although growth remained positive

• Europe: Inflation rose again, while economic growth remained resilient

• US: Inflation continued to ease as markets delivered strong returns

• Asia: Markets delivered strong returns while inflation remained low

• Looking ahead

At a glance

After a challenging month in July, global markets rebounded in August. The UK lagged behind regions but still delivered positive returns – a notable shift from July, when it was the standout performer.

This change in fortunes shows why a well-diversified portfolio matters. It is extremely difficult to predict which regions will lead or lag from one month to the next.

Inflation, interest rates, and global events continued to influence markets, while investment returns for the year to date remained broadly positive.

Overview

Global markets delivered positive returns in August, although the UK lagged behind other regions. Once again, its relatively low exposure to technology companies was a key factor setting it apart from global peers.

Elsewhere, returns were strong, with Asian and emerging markets leading the way and building on their positive performance so far this year.

Economic growth remained positive across the major regions. However, inflation remained above central bank targets in most areas, while generally staying lower across Asia.

UK: Inflation increased and markets lagged, although growth remained positive

After a strong showing in July, the UK had a mixed month in August. Markets lagged behind global peers, although returns remained positive. Inflation increased, while the economy continued to grow.

The rate of inflation rose to 2.9% in July, up from 2.6% in June and its highest level in four months. Housing and household services made the largest contribution to the increase, following a 13% rise in Ofgem’s energy price cap¹.

The Bank of England held the base rate at 3.75% at its July meeting amid warnings that inflationary pressures could increase again. The latest figures underline the uncertainty facing policymakers ahead of their next decision in September².

There was more encouraging news for the UK economy, which grew by 0.4% in the second quarter of 2026. Although this was slower than the 0.6% growth recorded in the first quarter, it represented a further period of economic expansion³.

For investors, rising inflation could make future interest rate cuts less certain. Continued economic growth, however, may provide some support for company earnings and investor confidence.

Against this backdrop, the FTSE All-Share Index, which tracks around 900 of the UK’s largest listed companies, returned 0.7% in August. It lagged behind other global markets, partly reflecting its relatively limited exposure to the technology sector, but remained up 11.9% for the year to date⁴.

Europe: Inflation rose again, while economic growth remained resilient

Eurozone inflation rose for the third consecutive month in August, while the economy continued to grow and markets delivered positive returns.

The annual rate of inflation increased to 3.3% in August, up from 2.9% in July, and its highest level since September 2023. The rise was largely driven by higher energy prices amid continued conflict in the Middle East⁵.

The eurozone economy grew by 0.4% in the second quarter of 2026, following no growth in the previous quarter. This was the bloc’s strongest quarterly expansion since the first quarter of 2025, supported by investment in AI and increased government spending. Among the largest euro area economies, Spain once again recorded the strongest growth, although all experienced some expansion⁶.

For investors, higher inflation can make the outlook for interest rates less certain. However, continued economic growth may help to support business performance and investor confidence. The European Central Bank held rates at its July meeting, having raised them in June.

European equities lagged behind most other major markets in August. The MSCI Europe ex UK Index, which tracks large- and mid-cap companies across the region, gained 0.9% over the month, just ahead of the UK⁷.

US: Inflation continued to ease as market delivered strong returns

In the US, inflation fell for the second consecutive month and the economy continued to grow, while markets delivered strong returns.

The annual rate of inflation fell to 3.4% in July, down from 3.5% in June and further below the recent high of 4.2% recorded in May⁸. Monthly energy prices continued to fall, although they remained considerably higher than a year earlier.

Although inflation eased, it remained elevated. The Federal Reserve (Fed) kept interest rates unchanged at its July meeting, with its next decision due in September⁹.

The US economy grew at an annualised rate of 1.5% in the second quarter of 2026, slowing from 2.1% in the previous quarter¹⁰.

For investors, easing inflation may improve the prospect of future interest rate cuts, although the timing remains uncertain. Continued economic growth may also help to support company earnings and investor confidence.

US equities had a strong month. The S&P 500, which tracks 500 of the largest listed companies in the US, gained 2.7%, with AI-related stocks continuing to be a key driver of returns¹¹.

Asia: Markets delivered strong returns while inflation remained low

Asian and emerging markets were among the strongest performers in August, while inflation remained below 2% in both Japan and China.

Japan’s TOPIX Index, which tracks a broad range of companies listed on the Tokyo Stock Exchange, rose by 3.9%.

Meanwhile, the MSCI Emerging Markets Index, which tracks companies across developing economies, gained 3.4%, and the MSCI Asia ex-Japan Index, which covers large and mid-sized companies across Asia excluding Japan, rose by 3.3%¹².

Japan’s annual inflation rate increased to 1.9% in July, its highest level since December 2025¹³. In China, inflation eased to 0.5%, down from 1% in June and its lowest level since January¹⁴.

For investors, August’s strong returns reinforced Asia’s position as one of the best-performing regions so far in 2026. However, the differing economic conditions across its markets highlight the importance of maintaining a diversified approach.

Looking ahead

The UK Budget is scheduled for Wednesday, 28 October. The period around a Budget can bring some market uncertainty as investors and businesses consider speculation beforehand and assess the measures announced afterwards.

Market movements around major events can feel unsettling. However, reacting to short-term headlines can risk taking attention away from your longer-term objectives. A well-diversified portfolio, built around your individual circumstances and goals, is designed to help you navigate periods of uncertainty.

If you have questions about your portfolio, or recent market movements have left you uncertain about what they could mean for your investments, your wealth planner can talk this through with you in the context of your long-term goals.

A simple glossary

Inflation is the rate at which prices rise over time. If inflation is 2%, something that cost £100 a year ago might cost around £102 today.

Low and high inflation both matter. Lower inflation can ease pressure on household spending and may give central banks more room to cut interest rates. Higher inflation can make everyday costs rise more quickly and may keep interest rates higher for longer.

Interest rates influence the cost of borrowing and the return on savings. When rates are higher, borrowing can become more expensive for households and businesses. When rates fall, it can sometimes support spending, investment and company confidence.

Index is a way of measuring how a group of investments has performed. For example, the FTSE All-Share follows a broad range of UK-listed companies, while the S&P 500 follows 500 of the largest listed companies in the US.

Equities are shares in companies. When you invest in equities, your return is linked to how those companies perform and how other investors value them.

Volatility means the ups and downs in investment values. It can feel uncomfortable, especially when markets fall, but it is a normal part of investing.

Emerging markets are economies that are still developing compared with larger, more established markets such as the US, UK or Europe. They can offer growth opportunities, but they may also experience sharper short-term market movements.

¹ 02.09.26 United Kingdom Inflation Rate Trading Economics,² 30.07.26 Interest rates and Bank Rate: our latest decision Bank of England,³ 02.09.26 United Kingdom GDP Growth Rate Trading Economics,⁴ 01.09.26 Review of Markets over August JP Morgan,⁵ 02.09.26 Euro Area Inflation Rate Trading Economics,⁶ 02.09.26 Euro Area GDP Growth Rate Trading Economics,⁷ 01.09.26 Review of Markets over August JP Morgan,⁸ 02.09.26 United States Inflation Rate Trading Economics,⁹ 29.07.26 Fed holds interest rates steady despite Trump’s renewed calls to lower them The Guardian,¹⁰ 03.08.26 United States GDP Growth Rate Trading Economics,¹¹ 01.09.26 Review of Markets over August JP Morgan,¹² 01.09.26 Review of Markets over August JP Morgan,¹³ 02.09.26 Japan Inflation Rate Trading Economics,¹⁴ 02.09.26 China Inflation Rate Trading Economics

Please note

The content of this guide was accurate at the time of writing. Information may change after publication because of changes in circumstances, regulation, or legislation. This guide is for general information only and does not provide personal advice. It is intended for retail clients.

The value of your investment, and any income from it, can go down as well as up. You may not get back the full amount you invested.

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Last updated September 2026 - EX2026-22