Resilient markets against a mixed backdrop
Investment Update - September 2026
August ended on a positive note for equity markets. The global equity index, driven mainly by the rebound in US and Asian markets, rose by 1,70%*. The United States gained 1,80%*, while emerging markets advanced by 3,4%*. Europe also ended the month higher, albeit with a more modest gain of 0,5%*.
This recovery was accompanied by renewed interest in growth stocks, which returned to favour. The Technology sector regained positive momentum, although performance across the artificial intelligence theme was more mixed.
Geopolitical tensions remained firmly in focus throughout the month. The lack of decisive progress between the United States and Iran maintained a risk premium in energy markets. Following their sharp rise in July, oil prices edged higher in August and remained close to multi-month highs, with Brent trading at around USD 90. This continues to raise questions about the inflation outlook and, consequently, the future path of monetary policy.
Developments in bond markets were more mixed. The yield on the 10-year US Treasury ended the month slightly higher at around 4,75%. In Europe, the German 10-year yield rose by around ten basis points to 3,32%, its highest level since 2011. With public-sector financing needs increasing, persistent inflationary pressures and rising term premiums continue to weigh on longer maturities.
Neither the Federal Reserve (Fed) nor the European Central Bank (ECB) held a monetary policy meeting in August. The main focus was therefore on the Jackson Hole Symposium. On this occasion, Fed Chair Kevin Warsh reiterated the firm commitment to the 2% inflation target and stressed that price pressures remained too strong. His remarks, which were interpreted as relatively hawkish, strengthened expectations of possible monetary policy tightening as early as September.
On the macroeconomic front, US data painted a mixed picture. Second-quarter growth was confirmed at an annualised rate of 1,5%, while labour market and consumption data showed some signs of slowing. Nevertheless, business activity remains robust: the preliminary composite PMI reached 56,0 in August, its highest level since April 2022, supported in particular by strength in the services sector.
Economic momentum in Europe also remains resilient. Second-quarter eurozone growth was confirmed at 0,4%, while the composite PMI rose to 52,1 in August. The improvement in industrial activity, particularly evident in Germany, is an encouraging sign. There is one caveat, however: inflationary pressures are becoming entrenched. Eurozone inflation rose to 3,3% in August, driven in particular by a year-on-year increase in energy prices, while core inflation remained at 2,4% year on year.
Against this backdrop of continued solid growth but persistently high interest rates, portfolio positioning remains favourable towards risk assets. Equities remain overweight relative to bonds, while the sector allocation retains a cyclical bias. The Industrials and Technology sectors continue to benefit from the investment cycle linked to artificial intelligence. European and US banks also remain favoured in order to benefit from resilient economic activity and high interest rates. Meanwhile, positions in Biotechnology and small and mid caps have been reduced.
From a geographical perspective, positioning remains broadly neutral, although the United States was recently moved to overweight. Finally, within the bond allocation, the preference remains for credit, where carry and spread dynamics remain more attractive than exposure to long-dated sovereign bonds.
*Performances are calculated in euros.
Stock markets
Equity markets proved resilient in August despite continued geopolitical uncertainty and persistent trade tensions. The second-quarter earnings season was very solid overall, supporting the earnings outlook and enabling markets to extend their gains.
At sector level, Basic Resources significantly outperformed, while Healthcare showed signs of improvement. By contrast, Technology was more volatile as investors questioned the high level of investment in artificial intelligence and its medium-term profitability. Real Estate and Utilities also underperformed, weighed down by the rise in long-term interest rates.
Conviction in the artificial intelligence theme remains strong. The decline in sector valuations and the solid earnings performance of companies exposed to this trend support a more constructive stance on Technology. A preference for semiconductors is maintained, while remaining selective within the software segment.
To fund the increased allocation to Technology, profits are being taken in Biotechnology and exposure to Consumer Discretionary is being reduced, as demand remains subdued across several segments. Other allocations remain unchanged.
Sovereign yields and credit market
In August, bond markets remained closely tied to developments in the Middle East conflict and energy prices. The month had initially looked promising. Progress in discussions surrounding the Strait of Hormuz led to a marked fall in oil prices and inflation expectations, allowing yields to ease somewhat at the very beginning of the month. However, in the absence of a lasting agreement, the trend quickly reversed.
In the United States, the 10-year yield fluctuated throughout the month. Periods of easing, as oil prices fell and inflation data proved more reassuring, were followed by renewed upward pressure as geopolitical and energy risks returned to the fore. The move was more pronounced at the long end of the curve: the 30-year yield reached 5,31%, its highest level since 2007, driven by a combination of inflation concerns, fiscal worries and rising term premiums. The Treasury's announcement of increased Treasury buybacks provided some relief at the long end, although it did not result in a lasting reversal of the trend. Towards the end of the month, Kevin Warsh's Jackson Hole speech ultimately proved considerably more explicit and hawkish, following several weeks during which he had deliberately limited forward guidance, reviving expectations of a policy rate increase. The 10-year yield therefore ended August 1 bp higher at 4,75%.
Sovereign yields in the eurozone were also volatile, although upward pressure was more pronounced than in the United States, given the region's significantly greater exposure to the energy shock. Rising gas prices, inflation concerns and resilient economic data weighed particularly on longer maturities, with the German 30-year yield reaching 3,81%, its highest level since 2011. At the same time, markets continued to price in a scenario of further monetary policy tightening. Yields experienced brief periods of easing as hopes of a de-escalation in the Middle East occasionally resurfaced, without altering the overall trend. The 10-year Bund therefore ended August 12 bp higher at 3,32%, also its highest level since 2011.
In credit markets, Europe proved more resilient than the United States. Investment Grade spreads tightened by 1 bp to 76 bp, with BBB-rated bonds, automotive and telecommunications outperforming, while financials slightly underperformed. High Yield spreads tightened more significantly, by 10 bp to 255 bp, driven by BB- and B-rated bonds. In the United States, Investment Grade spreads widened slightly by 1 bp to 80 bp, weighed down in particular by longer maturities, while High Yield spreads tightened by 22 bp to 263 bp, with BB- and B-rated bonds significantly outperforming CCC-rated bonds.
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