September 2026

UK

Mid-caps lead blue chips: the FTSE 100 Index underperformed many of its major global counterparts during August. The blue-chip index’s performance was dampened partly by weakness in commodity-related and banking sectors, and by its low exposure to technology- and AI-related companies, while rising bond yields reduced the appeal of some of the major dividend payers. During August, the FTSE 100 Index fell by 0.4%. In contrast, the more domestically focused FTSE 250 Index hit a new high during the month, benefiting from its lack of exposure to the mining sector, and renewed interest in UK medium-sized companies. The mid-cap index rose by 4% over August.

Economic growth loses momentum: having expanded by 0.6% in the first quarter of 2026, UK economic growth slowed to 0.4% in the second quarter, dampened by higher energy costs caused by the Middle East conflict. Job vacancies fell between May and July. Although average wages (excluding bonuses) rose by 3.5% year on year during the period, earnings growth in the private sector fell to 2.8%, reaching its lowest level since 2020.

Inflationary pressures: intensifying concerns over inflation and borrowing drove the ten-year gilt yield as high as 5.15% during August, rising to levels last seen in 2008. The annualised rate of consumer price inflation rose to 2.9% in July to reach its highest rate since March, stoked by rising gas prices. Elsewhere, Ofgem announced a 4% increase in the energy price cap from 1 October, citing higher gas prices; the increase is expected to add to inflationary pressures. 

Green shoots? Consumer confidence continued to improve, according to GfK, achieving its strongest showing since August 2024. Meanwhile, Lloyds’ Business Barometer reported that UK business confidence improved in August to reach its highest level since March amid optimism that the economy is coping better than expected with the impact of geopolitical tensions and higher energy prices.

Double-digit growth for UK AUM: during August, the Investment Association reported that the UK investment management industry had reached a new peak of £11.1 trillion assets under management in 2025, registering a second straight year of double-digit growth. 

A risk to stability? In his role as Chair of the Financial Stability Board, Bank of England Governor Andrew Bailey warned G20 finance ministers and central bank governors that AI posed a significant risk to global economic stability and to the security of financial systems.

Global

Oil rises again: global bond yields surged during August, fuelled by concerns over inflation, government indebtedness, and AI spending. The inflationary situation was compounded by renewed hostilities in the Middle East, which pushed up oil prices once again. During August, the price of a barrel of Brent crude oil rose as high as US$94.8, having dipped to US$78.1 earlier in the month. The ten-year Treasury bond yield reached 4.75% by the end of August.

US equity indices peak again: the Dow Jones Industrial Average Index and the S&P 500 Index both hit new closing highs during August, boosted by strong corporate earnings releases. While investors’ appetite for AI-related stocks picked up, higher bond yields dampened demand for more defensive dividend payers. Over August, the Dow Jones Industrial Average Index rose by 1.3%, while the Nasdaq Index climbed by 3.9%. Elsewhere, relations between the US and Canada soured further during the month amid fresh trade tensions between the two countries.

Hawkish Fed: in a high-profile speech at the annual Jackson Hole symposium, Fed Chair Kevin Warsh said that the inflationary backdrop had not showed “meaningful” improvement, fuelling speculation that US interest rates could rise as early as September. The annualised rate of inflation eased from 3.5% to 3.4% in July but remained significantly above the Fed’s 2% target. Gasoline prices have risen by 24.6% over the 12 months, according to the Bureau of Labour Statistics.

Dax hits new highs: during August, European Central Bank (ECB) President Christine Lagarde warned that the pillars that had supported Europe’s post-war growth are “eroding” and said: “Firms invest less when capital is seen as less safe, weighing on output and consumption”. The minutes from the ECB’s July rate-setting meeting were published and indicated some appetite among policymakers for a rate increase, fuelling expectations of an upward move in September. The Dax Index rose by 2.5% in August and reached a new record.

BoJ to tighten? The yield on Japan’s benchmark bond reached 2.95% during August, driven up in part by concerns government spending. Ongoing inflationary pressures look likely to put pressure on the Bank of Japan to tighten rates; the annualised rate of consumer price inflation climbed from 1.6% in June to 1.9% in July. The Nikkei 225 Index rose by 3.8% over the month, boosted by its exposure to AI-related and banking stocks.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.