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Compared to recent months, August felt relatively calm for investors, although the once quiet month is now relatively busy with company results, whilst interest rate policies and the ongoing histrionics of Trumponomics provided plenty to talk about.

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The month started with the Bank of England narrowly voting (5 to 4) to reduce interest rates by a quarter point to 4%. Perhaps it is not surprising that there was little consensus given that UK economic data shows a resurgence of inflation contending with sluggish economic growth. Inflation still confounds and the latest official reading of 3.8% calling into question whether there is room for further rate cuts this year. UK economic growth in the second quarter beat forecasts, GDP growth slowed to just 0.3%. Although UK annualised growth for the first half of 2025 was the fastest in the G7 at 2.2%, it appears that tax rises could be on the agenda in the Autumn budget to help plug the deficit.

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Across the pond US growth has so far remained resilient in the face of tariff policies. Q2 US GDP growth was revised upwards to 3.3%. Despite this Trump continues to push for lower interest rates and his recent moves to influence interest rate policy and threatening independence of the Federal Reserve unnerved investors. Ongoing criticism of Jay Powell and his sacking of Fed Governor Lisa Cook at the end of the month increased probability that there will be a rate cut in September, but also steepened the yield curve and weakened the dollar, with concerns it will lead to inflation further down the line.

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President Trump and his infernal tariffs remain in the news and at the end of the month there was the little matter of a US court saying most of the tariffs are illegal, so expect ongoing court wranglings to ensue! Other developments in August saw the imposition of key tariffs on Chinese goods being postponed for a further 90 days. Whilst at the same time he slapped 50% tariffs on Indian goods in response to their purchasing of Russian oil; a move which economists have warned could shave 0.8% from Indian economic growth. Such news-flow highlights the lack of a consistent strategy in Trump’s trade policies and the ongoing uncertainty it causes for investors.

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One consequence of the trade war appears to be a closer alliance between China and India (and also Russia) with the leaders putting on a united front at a security summit in Beijing at the end of August. Time will tell whether this leads to greater economic co-operation between the elephant and the dragon – a force to be reckoned with given their combined population of 2.8 billion people.

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Market Watch

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Overall stockmarkets had a good month with all major markets up and the MSCI World index increasing by 2.1%. Talks of an end to US exceptionalism appear premature and the S&P 500 finished up 1.99% in August, hitting a new peak along the way. The Nasdaq was broadly flat with Nvidia beating estimates on Q2 earnings, though the market was still disappointed despite revenue up 56% to $46 billion.

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The UK’s FTSE also hit a new high eking out a monthly 1.23% gain. A gain of 1.23% might sound measly but if that was repeated every month for a year your total return would be 15.8% - almost twice the historical annualised equity return. Maybe the $15 billion US investors have put into the UK market in 2025 is helping drive returns!

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China is the market though that’s catching the eye as The Hang Seng did well last month gaining over 4% in August to cap a 32% Year to date rise but it was Shanghai leading the charge with a gain of 8.7%.

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Bond markets felt a bit more volatile than equity markets and UK bond markets are showing little faith in the Labour government’s ability to effectively manage the economy. UK ten-year gilt rose sharply last month (despite a rate cut to 4%) after starting August paying 4.57% it finished offering a yield of 4.72%. French bonds are also in the eye of a storm as their government faced a no confidence vote, with high levels of debt to GDP the ten-year OAT yields almost 0.75% more than the German Bund and almost the same as Italy.

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However, US bonds went the other way on the back of an expected rate cut in September and a US Ten-year treasury now offers 4.23% compared to 4.37% a month ago. In Japan the ten-year JGB inched up marginally and now offers 1.59% however it’s the longer debt that has investors concerned with the 30-year gilt now paying 5.6% and the JGB 3.17%.

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Turning to commodities now and the price of gold regained the strong momentum seen earlier in the year. Gold closed at $3518 an ounce gaining $175 in August, with investors favouring gold as an alternative to the weakening dollar. However, a barrel of Brent oil reversed July’s gain of $5 falling over $4 to finish at $68.12. Could the US’s record production of oil have something to do with the recent weakness? In June the US produced 13.58 million barrels per day of crude.

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From a currency perspective the dollar weakness returned with the greenback down just over 2% versus the pound. In 2025 the dollar has lost over 7% versus the pound putting a dampener on UK investors global equity returns. Sterling was marginally down versus Yen and Euro over the last month.

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Fund Watch

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Turning to funds and from a sector perspective China led the way with a gain of over 5%. Chinese economic data released mid-month was mixed with both retail sales and industrial production lacklustre, yet markets continue to rise strongly. Maybe it’s simply investors taking advantage of cheap valuations. Latin America and commodities also did well – these two sectors are often tied together and both benefit from a weak dollar. Of course, the weak dollar had a negative impact for UK investors.

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Looking at individual funds and there was one clear winner, gold. Gold powered through $3500 an ounce and in the process reignited gold equities. Nine of the top ten funds were gold and precious metals funds. Many commentators still think gold equities are cheap and haven’t kept pace with the rise of the physical price. With rate cuts in the US expected in September, gold could be set for a strong end to 2025 as lower rates reduce the opportunity cost of owning gold. Ruffer Gold topped the charts gaining 20%. Allianz China A Share also made the top ten and outside of there were plenty more China and Asia funds amongst big winners over the month.

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At the foot of the tables, there was also a clear trend, India invested funds. Are Trump tariffs to blame? Six of the bottom ten performing funds were Indian and the India sector was the worst performing IA sector in August falling over 3%. The UK Index Linked Gilt sector also struggled as investors fretted over the long-term outlook for the UK.

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Moving on to investment trusts and it felt a quiet month with little M&A activity. From a sector perspective it was like the open-ended world with China trusts leading the way with a gain of over 7%. In fact, three of the top five sectors were the same for closed and open-ended funds last month: China, commodities, and Japan. For the record, the top performing trust in August was Golden Prospect Precious Metals with a rise of 22%. Vietnam trusts also deserve a mention as whilst only one made the top five, others were just outside.

Important Information

This document is produced by Fairview Investing Ltd, an independent research consultancy. The content is for information purposes only and does not constitute financial advice. The commentary or research provided do not constitute a personal recommendation to deal. Any statements, opinions, forecasts, and figures are made by Fairview Investing (unless otherwise stated). They are considered to be reliable at the time of writing but may be subject to change.

Fairview Investing accepts no legal responsibility or liability for the content of this material. The contents of the document are not to be re-produced or circulated without the express permission of Fairview Investing Ltd. Fairview are independent investment consultants sitting on the Investment Committee of EXE Capital Management.

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