Investor update: September 2026

At a glance

• Global equities rebounded in August after a more mixed July, supported by strong earnings for large US companies. In US equities, the software sector continued its recovery after enduring a difficult 18 months.
• In bond markets, government bond yields remained elevated. In the UK, 10-year gilt yields moved above 5%, pushing higher towards the end of the month. Yields have been between around 4.8 – 5% since March. Higher yields have improved prospective income for bond investors, but total returns have been more mixed so far this year.
• We are still positive on the outlook for equities but slightly trimmed our exposure. We hold the proceeds in cash, giving us the flexibility to redeploy as we assess new opportunities.

Equities rebound in August

After a mixed start to the summer, August brought a welcome improvement in equity market sentiment. Looking at the US market, the most dominant globally, a key driver has been the strength of the US corporate ‘earnings season’ – where large companies report their financial results.

We’ve seen a relatively meaningful ‘rotation’ within US equities, where the types of companies driving index performance changes notably. In particular, parts of the software sector performed strongly after roughly 18 months of underperformance. Over that period, investors had become increasingly concerned that artificial intelligence (AI) could prove disruptive for software business models – reducing barriers to entry and potentially making it easier for new competitors to take market share.

More recently, that dynamic has started to reverse. Since around June, software has improved versus the overall US market. Several large, established software names have rebounded, supported by solid results.

From our perspective, even when the news cycle is noisy, markets have been supported by robust earnings and company fundamentals.

Bonds: high yields and renewed focus on fiscal dynamics

Bond markets remained in focus in August, with government bond yields hitting the headlines. In the UK, 10-year gilt yields climbed back above 5%, rising over the latter part of the month. Yields passing the 5% mark naturally drew attention, but it’s worth noting that yields on these bonds have been persistently elevated for months. They have been roughly within the 4.8 – 5% range since March.

A bond’s yield represents its annualised rate of return, and bond prices and yields move in opposite directions. When yields rise, bond prices generally fall. Year-to-date, total returns for bond investors have been relatively subdued, with UK bond returns broadly flat to slightly negative in 2026 as lower prices have offset the increased level of income received.

In the US, attention has also been on the bond markets, especially for longer-dated bonds such as the 30-year Treasury. There has been discussion around the US Treasury buying longer-dated bonds in an attempt to reduce yields. That matters because many US mortgage rates are influenced by longer-term borrowing costs, so higher long-term yields can feed into household finances and the broader economy.

Higher rates and rising levels of government debt have also revived interest in what’s sometimes referred to as the ‘debasement trade’ – the idea that if governments continue to run large deficits, and markets doubt they will be tackled meaningfully, then finite assets can look more appealing. Assets such as equities, gold or real estate can attract attention as potential beneficiaries.

One striking example of this theme in August was the strength of gold, which saw double-digit returns over the month. We also saw a softer US dollar, which can be consistent with this type of market positioning.

AI update: acceleration continues, but the “pay-off” phase matters

AI remains one of the most important market themes, and we continue to see signs of acceleration rather than slowdown. The scale of investment into AI-related infrastructure remains substantial, and we expect a supportive capital expenditure backdrop to continue into 2027 and 2028, to help meet the strong demand for chips and enabling technologies across the ecosystem.

Nvidia is a leading provider of the chips that underpin the AI ecosystem and the largest company by market capitalisation in the world. Its earnings releases are closely watched by investors. Its latest earnings were released on 26 August, with the results being very strong across revenue, earnings and forward guidance. This is another reminder of how powerful this investment wave has been for companies at the centre of AI infrastructure.

We think the next phase of the story will increasingly focus on an important question: do the revenues generated by AI applications scale enough to justify the vast infrastructure spending? Over time, markets will want confidence that the AI service providers themselves can generate durable, efficient revenue growth.

We are seeing encouraging signs of revenue momentum in parts, but we will continue to watch whether monetisation broadens and strengthens in a way that supports the scale of investment across the supply chain.

Economic developments: Iran, oil, and UK inflation

Geopolitics remains an important variable, particularly through the lens of energy prices. Oil prices are key. For now, oil prices are not at levels proving overly disruptive for the global economy. There is also some optimism that some sort of agreement could emerge in the coming weeks in Iran, which could help stabilise oil prices. However, as we have seen in recent months, uncertainty remains and the situation can change quickly.

If oil were to rise back above $100 per barrel and stay there, that would likely be more disruptive. This could push inflation expectations higher and complicate the outlook for interest rates.

In the UK, inflation ticked up to 2.9% in July. While this is not a dramatic increase, we continue to watch it closely. The UK has experienced the highest cumulative inflation of G7 nations since the pandemic. The recent move appears largely energy-related, reflecting the mechanics of energy price caps and recent changes in energy prices. The key issue is whether this remains contained or begins to spread more broadly through the economy – something we will be monitoring in the next inflation releases.

How we are managing portfolios

Taking all of this into account, we made a modest portfolio adjustment early in the month following the successful US corporate earnings season. We reduced equity exposure slightly and held the proceeds in cash.

Importantly, we remain overweight equities overall and continue to hold a positive view. The move is about being pragmatic – locking in some gains and increasing flexibility. Holding some more cash gives us the ability to redeploy efficiently as we identify opportunities in the coming weeks. We will continue to assess the asset mix of portfolios over the coming weeks as we optimise positioning for the rest of the year.

About this update: This update was recorded on 27 August 2026. All figures, unless otherwise stated, relate to August 2026. Data to the 26th of the month.

Sources: MacroBond, J.P. Morgan Personal Investing and Bloomberg.

Risk warning

As with all investing, your capital is at risk. The value of your portfolio can go down or up and you may get back less than you invest. Past performance and forecasts are not reliable indicators of future performance. We do not provide investment advice in this article. Always do your own research.