Global Market Overview
Global equities delivered a broadly positive month in August 2026, supported by generally accommodative liquidity conditions and continued earnings resilience across key growth sectors.
The MSCI ACWI returned +2.67% in USD for the month, while the MSCI World (developed markets) returned +2.58% in USD. Emerging markets outperformed, with the MSCI EM Index returning +3.37% in USD. Within developed markets, the NASDAQ 100 led the advance, returning +4.22% in USD. The S&P 500 returned +2.69% in USD. Japanese equities were positive, with the JPX-Nikkei Index 400 returning +3.02% in USD, while the FTSE 100 (UK) returned +0.97% in USD. The Hang Seng was the notable detractor, declining -0.98% in USD. Global listed property was the clear underperformer, with the S&P Global REIT Index returning -3.00% in USD for the month, consistent with the pressure exerted by persistently elevated bond yields. The US 10-year Treasury yield traded in the region of 4.70–4.75% through August, maintaining an elevated discount-rate hurdle for rate-sensitive asset classes.
Commodity markets attracted considerable attention during the month. The breadth of the commodity advance broadened materially and became increasingly difficult to ignore — encompassing agricultural commodities driven by a super El Niño (described as likely to be the strongest in living memory and compounded by Russia-Ukraine supply disruptions), diesel with crack spreads exceeding $100, copper where tariff stockpiling exacerbated data centre demand, and gold and silver supported by continued central bank demand and US Treasury market intervention. China’s renewed liquidity injections were identified by the investment committee as the immediate driver to watch for gold. A key geopolitical event during the month was the continued closure of the Strait of Hormuz, with approximately 10.8 million barrels per day removed from global markets. This constituted one of the largest supply shocks in modern energy history — described at the investment committee as a structural rupture rather than a temporary disruption. Securing insurance coverage for vessels and cargoes through the Strait became extremely difficult, with Lloyd’s of London making it explicitly clear it would not insure transit. Brent crude spiked above $90 after Middle East developments ruled out an extension on 17 August, though the market was assessed as pricing negotiations rather than physical supply conditions.
On the macroeconomic and policy front, the US labour market showed signs of being weaker than the headline unemployment rate implied. July payrolls fell 23,000, with May and June revised down by 103,000. Labour force participation dropped 0.7 percentage points since January, implying an adjusted unemployment rate closer to 6%. Core CPI eased to 2.5%, with unit labour costs up just 1.4% over four quarters. Despite this softening, Federal Reserve Chair Warsh’s Jackson Hole remarks lifted market pricing for a September rate hike to 66%. In Japan, the Ministry of Finance disclosed a record ¥15.4 trillion of Yen-buying intervention, joined by the US Treasury. Despite this, USD/JPY ended the month near 160 — illustrating the limits of intervention absent a decisive shift in Bank of Japan policy. Japan’s July core CPI remained at 1.8%, a sixth consecutive month below target, which is what keeps the rate differential open.
South African Market Overview
South African equities delivered a notably strong month in August, recovering from a difficult prior period and providing a welcome tailwind for domestic investors.
The FTSE/JSE All Share Index returned +4.65% in ZAR for August, bringing the year-to-date return to +2.76% in ZAR. The August performance represented a meaningful improvement relative to the subdued year-to-date trajectory entering the month. Resources were the primary driver of this equity market strength, rallying with considerable force in line with the broad global commodity advance. SA asset classes and equity sector relative returns confirmed resources leading the way — a direct beneficiary of the commodity breadth story that dominated global markets through the month. Technical analysis presented at the investment committee characterised the South African equity market as showing distribution patterns across several indices — including the Capped All Share, the Top 40, the Mid Cap and the Resources 10 — while the Financials 15 appeared less weak, drawing support from ZAR strength and the domestic bond market. The investment team maintains that South African equities represent a value proposition rather than a growth story. The MSCI South Africa trades at a meaningful discount to both emerging market and global peers, with dividend yields that remain attractive in the 5–8% range. This income-generating characteristic continues to make SA equities relevant within a diversified portfolio context, even as the structural growth environment remains challenged.
SA Listed Property underperformed the broader equity market, returning -3.81% in ZAR for August (year-to-date: +2.94% in ZAR). The pullback is consistent with broader pressure on rate-sensitive asset classes in a global environment where long-dated bond yields remained structurally elevated. The FTSE/JSE All Bond Index returned +0.69% in ZAR for August (year-to-date: +3.52% in ZAR), while cash as measured by the STeFI Composite returned +0.58% in ZAR for the month (year-to-date: +4.54% in ZAR).
The domestic monetary policy backdrop remained a key focus. The SARB held the repo rate at 7.00% — a rate environment characterised by continued above-target inflation expectations, subdued private investment, infrastructure bottlenecks and weak business confidence. While much of the recent increase in inflation has been driven by external supply-side factors, the SARB also noted signs that underlying price pressures are becoming more persistent, with core inflation expected to remain elevated. Oxford Economics’ updated South African forecasts project full-year 2026 CPI at 4.1%, with GDP growth expectations remaining subdued at 1.1% for 2026, reflecting weak manufacturing activity — the ABSA PMI contracted to 47.3 — and deeply negative consumer confidence, which fell to -19 in the second quarter. The investment team’s base case continues to hold that 7.00% likely represents the peak of the current SARB rate cycle.
The SA bond market continued to attract close attention from the investment team. The SA yield curve was described at the investment committee as “the odd man out” — with the SA 10-year government bond yield rising broadly in line with G7 curves, driven by domestic idiosyncratic factors. At times through August, SA bond yield movements were not well correlated with ZAR movements — a dynamic the team monitored carefully. The ZAR remained relatively firm through the month — a feature of the currency that has persisted throughout 2026 and that, while constructive for domestic purchasing power, introduces translational headwinds for offshore returns when measured in ZAR. On the structural side, Eskom’s return to profitability and the improved electricity supply environment were noted as genuine positives for the South African economy. Transnet’s continued operational dysfunction, however, remains the single largest constraint on South African growth potential, with Oxford Economics estimating potential growth at approximately 1.5% per annum until meaningful logistics and infrastructure reform is achieved. With November’s local government elections approaching, the ANC’s ongoing erosion — having recorded a net loss of 48 seats across 435 by-elections since 2021 — adds a layer of political uncertainty that the investment team monitors as a medium-term factor shaping governance quality, policy continuity and investor confidence.
Key Insights from Weekly Investment Team Meetings
- China liquidity is the dominant near-term driver for gold. The investment team highlighted that the PBoC’s balance sheet expansion and renewed liquidity injections are the primary support for bullion — more so than traditional Western debasement narratives. By expanding domestic liquidity, the PBoC is effectively raising wages and prices relative to outstanding debts, with rigid capital controls preventing this from affecting the external value of the Yuan.
- Bond yields appear structurally anchored at higher levels. Research from Alpine Macro presented to the committee argued that the global savings glut is ending, with three independent approaches pointing to a fair-value range of 4–5% for US 10-year Treasury yields, mostly driven by the real yield component. US fiscal policy has turned pro-cyclical, Europe has abandoned austerity, and AI-led corporate investment is reviving demand for capital. Duration is considered attractive only as yields approach the 5% level.
- Concentration and financing risk in AI and technology warrants attention. The Market Temperature Gauge (Version 3, updated 25 August 2026) flagged a number of deteriorating signals: free cash flow was marked down as record capital expenditure absorbs operating cash flow; AI capex intensity scored 2/10 as five hyperscalers committed approximately US$750 billion in capital expenditure for 2026; market concentration remained unusually high; and two new indicators — hyperscaler financing burden and AI financing circularity — were added and both scored low, reflecting a material shift from self-funded capex to debt, equity and external capital arrangements.
- Commodity breadth is broadening. The technical research team described the breadth of the commodity advance as “increasingly difficult to ignore,” citing the super El Niño driving agricultural supply pressure, diesel crack spreads exceeding $100, copper demand amplified by tariff stockpiling and data centre build-out, and continued central bank support underpinning gold and silver.
- Middle East geopolitical risk remains a structural market variable. The closure of the Strait of Hormuz — removing approximately 10.8 million barrels per day from global markets — was characterised by the investment committee as a structural rupture rather than a temporary disruption. The consensus view entering the final week of August was that this situation would not be resolved before November.
Portfolio Implementation and Strategy
The investment team maintained an actively managed and broadly diversified asset allocation posture through August 2026.
In the domestic context, SA equity was held close to but slightly below neutral weight. SA money market was maintained significantly above neutral, providing defensive ballast and yield. Long-duration SA bond exposure was kept meaningfully below neutral, reflecting the team’s view that the structural case for higher long-term yields is credible and that extending duration materially does not yet offer attractive risk-adjusted compensation.
Globally, developed market equities were maintained at a significant overweight relative to neutral, supported by the broadly positive liquidity environment and corporate earnings resilience. Emerging market equities were held at a modest overweight, reflecting a constructive but not aggressive view. Global short-dated bonds and global cash were both held meaningfully above neutral in global mandates, consistent with the team’s preference for shorter duration in a structurally higher-yield environment.
Global listed property remained underweight, consistent with the challenging month experienced by that asset class. Spot commodities were held at approximately neutral, reflecting a constructive but measured view on the broader commodity complex — particularly in precious metals and energy.
The team’s overall positioning through August reflected a core philosophy of broad diversification, disciplined management of duration risk, and an acknowledgement of the supportive liquidity environment — without complacency about the concentration and valuation risks embedded in narrow technology and AI market leadership.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
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