August Monthly Market Review
- Anthony Walters
- Sep 15, 2025
- 3 min read
August brought a wave of cautious optimism to global markets. While central banks took divergent paths on interest rates, investors found encouragement in strong corporate earnings and signs of easing inflation. The Balanced portfolio Index edged up 0.27%, buoyed by resilient equities and renewed hopes of monetary easing in the U.S. Despite some turbulence in bond markets, diversification and nimble positioning proved rewarding.
Rate Cuts, Rebounds, and Renewed Optimism
· BoE cuts to 4%, Fed and ECB stay put
· Global stocks climb; Denmark and LatAm shine
· Emerging markets soar, led by Colombia’s 9.7% surge
The Balanced portfolio Index posted a modest gain of 0.27% in August, supported by continued strength in global equities. Investor sentiment was buoyed by strong corporate earnings, moderating inflation, and growing expectations of a Federal Reserve interest rate cut at its September meeting.
In contrast, bond markets faced headwinds as, despite a generally supportive rate environment, longer-dated government bonds declined in value amid rising concerns over the sustainability of spending plans in major economies.
Inflation and Interest Rates.
UK.
In August 2025, the Bank of England cut rates to 4.00%, but four of its nine policymakers - worried about high inflation - sought to keep borrowing costs on hold, suggesting the BoE's run of rate cuts might be nearing an end.
With the MPC facing the conflicting risks posed by an inflation rate that the BoE forecasts will soon be double its 2% target and a worsening of job losses, Governor Andrew Bailey and four colleagues backed lowering Bank Rate to 4.00% from 4.25%.
U.S. Federal Reserve.
In August 2025, the Federal Reserve held interest rates steady at 4.25% – 4.50% but growing signs of labour market weakness and soft inflation prompted calls for cuts. Fed officials, including Michelle Bowman and Mary Daly, advocated for up to three rate reductions this year. Inflation remained elevated, with core prices rising 2.90% year-over-year, the highest since February, driven partly by tariffs. Consumer sentiment fell sharply, reflecting heightened concerns about rising prices.
European Central Bank (ECB).
In August 2025, the European Central Bank held interest rates steady at 2.00%, pausing its year-long easing cycle amid resilient economic data and ongoing trade tensions with the U.S. Inflation edged up to 2.10%, slightly above the ECB’s target, with core inflation stable at 2.30%, reinforcing expectations that no further rate cuts are imminent.
Market performance.
Denmark led developed markets this month with a 5.03% gain, rebounding from a steep 13% decline in the previous month. The turnaround followed challenges at Novo Nordisk—a key player in the Norwegian market — which reported weaker profits and announced 9,000 job cuts, despite the popularity of the Wegovy weight-loss drug.
The MSCI Colombia Index surged over 9% in August, driven by easing inflation, aggressive rate cuts, and renewed investor optimism ahead of the 2026 presidential election. Market sentiment improved further on expectations of a shift toward pro-market policies and stronger corporate transparency.
Sector performance.
Latin America gained almost 6% last month supported by strong commodity performance, as Gold pushes to a new All Time High. At the other end of the scale, the India/Indian subcontinent sector fell due to new US tariffs of up to 50% on key Indian exports like textiles and pharmaceuticals. This triggered a sell-off in export-driven sectors and weakened investor sentiment.
Summary.
Markets found their rhythm in August, with global equities pushing higher and the Balanced portfolio Index posting a modest gain. Strong earnings and cooling inflation lifted investor spirits, while hopes of rate cuts in the US added momentum.
Central banks took mixed approaches: the Bank of England trimmed rates to 4.00%, but the Fed and ECB held firm. Despite some bond market jitters, equities rallied — Denmark bounced back, and Colombia led emerging markets with a near 10% surge.
Latin America shone thanks to strong commodities, while India stumbled under fresh US tariffs. All in all, it was a month that rewarded diversification and nimble positioning.
With some trade tensions easing and policy paths becoming clearer, investors have reasons to stay optimistic.
Sources.
The ‘Balanced portfolio benchmark’ is the UT Mixed Investment 20-60% Shares Sector.
Bank of England cuts rates to 4% after narrow 5-4 vote By William Schomberg, David Milliken and Suban Abdulla, Reuters, 7th August 2025.
Fed's Bowman makes case for 3 interest rate cuts in 2025 after voting against July hold by Jennifer Schonberger, Yahoo Finance, 11th August 2025.
Fed will likely need to cut rates in coming months, Daly says, by Reuters, 6th August 2025.
Key US inflation gauge holds mostly steady though core inflation ticks higher, by Christopher Rugaber, AP/ Yahoo Finance, 29th August 2025.
ECB holds rates unchanged, offers no clues about next move, By Balazs Koranyi and Francesco Canepa, 11th September 2025
Euro-Zone Inflation Quickens Beyond 2%, Backing Rate Pause, by Alexander Weber, 2nd September 2025
