The main points of the allocation meeting on August 26, 2026
Equities fell for the first week since mid-July, though flash PMIs offered late relief. Global equity markets declined last week for the first time since mid-July, as rising oil prices and a fresh climb in long-end bond yields weighed on risk sentiment. The S&P 500 lost 1.4% and the Nasdaq Composite 2.1%, both snapping three-week winning streaks, while the STOXX 600 slipped 0.7% and the Nikkei fell 3.1%. World equities (EUR) were down 1.8%, EM equities (EUR) bucked the trend with a 0.4% gain. Some of the damage was repaired late in the week after flash August PMIs beat expectations on both sides of the Atlantic, with the Eurozone composite reading rising to a nine-month high of 52.1 and the US composite reaching a four-year high of 56.0.
Oil prices spiked and trade tensions escalated as Washington ramped up pressure on Iran and Canada. Brent crude rose sharply last week, with WTI crude up 7.2%, as the absence of progress in US-Iran talks kept the risk of a Strait of Hormuz closure elevated. US Treasury Secretary Scott Bessent unveiled sweeping new sanctions on Iran, describing the campaign as the largest coordinated economic isolation effort in history. Separately, trade talks between the US and Canada broke down, with Washington imposing 50% tariffs on roughly $20bn of Canadian goods and Ottawa announcing dollar-for-dollar retaliatory tariffs effective September 8. The heightened uncertainty also showed up elsewhere in markets: the US dollar index fell 0.9% on the week, while gold rallied 5.5% to a three-month high.
Long-end government bond yields extended their climb, and the Treasury's intervention weakened the dollar without easing yields for long. The 30-year Treasury yield touched a fresh post-2007 high near 5.34% before the Treasury announced mid-week that it would at least double the size of its long-end buyback operations, to a minimum of $4bn per operation from September 9. The dollar fell almost 1% that day, its steepest one-day drop since March, as investors read the move as a step toward financial repression. The intervention briefly pulled the 30-year yield back to 5.19%, but it had crept back up to 5.27% by Friday's close, with the 10-year ending the week at 4.73% and the German 10-year Bund at 3.26%. Fixed income returns reflected the sell-off, with euro government bonds down 0.4% and euro investment grade corporates down 0.2% on the week.
The week ahead brings Nvidia's earnings, Fed Chair Warsh's first Jackson Hole speech, and fresh inflation data. Nvidia reports second-quarter results on Wednesday, August 26, with analysts looking for revenue near $92bn. The same day brings the US July PCE inflation reading, the Fed's preferred gauge. New Federal Reserve Chair Kevin Warsh delivers his first Jackson Hole keynote on Friday, August 28 — his first major public address since taking office in May.
We overweight equities and underweight money markets. Within equities, we overweight EM equities, underweight European equities, and remain neutral elsewhere. In fixed income investments, we overweight high yield corporate bonds and underweight government bonds, while remaining neutral on emerging market bonds and investment grade corporate bonds.
