Explore the latest trends and strategic insights in the August 2026 edition of the “Market Compass.”
AI euphoria gave way to increasing selectivity in July as the semiconductor sector came under significant pressure, geopolitical tensions in the Middle East pushed oil prices higher, and major central banks maintained their restrictive policy stance. Against this backdrop, broader equity markets proved remarkably resilient, while gold regained support from renewed central bank purchases.
Middle East conflict pushes oil prices higher again – The conflict between the United States and Iran remained a key driver of market sentiment during July. Following the collapse of the ceasefire, hostilities resumed, and shipping through the Strait of Hormuz continued to face significant disruption. Brent crude temporarily rose above USD 100 per barrel, fuelling concerns that a prolonged energy price shock could add to inflationary pressures and limit central banks’ room for manoeuvre. Towards the end of the month, diplomatic efforts showed renewed signs of progress, though a lasting de-escalation remains elusive.
Semiconductors lose their leading role – Following an exceptionally strong first half of the year, the semiconductor sector came under significant pressure. Intel (-38.0%), Lam Research (-33.1%) and ASML (-16.7%) were unable to escape the negative momentum, while Nvidia (+0.3%) remained largely unscathed. Despite the sell-off, the Philadelphia Semiconductor Index remains 60.2% above its level at the beginning of the year. The market reaction reflects not a fundamental shift away from the AI investment theme, but rather growing selectivity. Investors are increasingly focused on which companies can translate substantial investments in data centers and AI infrastructure into sustainable earnings growth. Meanwhile, the S&P 500 slipped just 0.1%, while the Euro Stoxx 50 (+0.5%) and the Swiss Performance Index (+0.7%) posted modest gains.
ECB and Fed remain restrictive – The ECB kept its deposit rate at 2.25%, while the Fed left its policy rate unchanged at 3.50%-3.75%. Notably, three FOMC members voted in favor of a further 0.25% rate increase. Fed Chair Kevin Warsh emphasised that higher market interest rates had already tightened financial conditions, suggesting the Fed is willing to allow markets to deliver part of the required monetary tightening. The yield on 10-year US Treasury bonds rose by around 0.32% during July, placing considerable pressure on global bond markets.
SpaceX falls below IPO price – SpaceX shares fell below their IPO price of USD 135 for the first time in mid-July. Profit-taking, a demanding valuation and the absence of near-term catalysts weighed on the share price. In August, the company is set to report its first quarterly results since the IPO, providing a key test of whether its elevated market valuation can be justified.
Central banks bought almost 300 tonnes of gold in Q2 2026 – Global central bank gold purchases increased by 231 tonnes quarter-on-quarter, marking the largest quarterly increase since the fourth quarter of 2024. The National Bank of Poland (+82 tonnes), the Central Bank of Uzbekistan (+41 tonnes) and the People’s Bank of China (+40 tonnes) were the largest buyers. This renewed demand reinforces a key pillar supporting the gold price and should continue to provide downside protection, even as the precious metal has fallen approximately 25% from its January peak due to sharply higher global bond yields.
What’s next and how we are positioned – Investors’ attention is likely to shift towards the annual Jackson Hole symposium over the coming weeks, given elevated inflation risks and persistent geopolitical uncertainty. We maintain our overweight allocation to equities with a clear regional preference for the United States, supported by earnings visibility, high-quality companies and broadening market leadership. Our tactical stance: Cash 2/5, Fixed Income 3/5 with a focus on high-quality issuers and disciplined duration management, Equities 4/5 with US preference, Alternative Investments 4/5 with gold as a strategic portfolio stabiliser.
Download the full Market Compass August 2026 PDF – Access our in-depth outlook, sector and regional analysis, fixed income positioning, and our detailed thesis on AI selectivity and gold. Download the PDF now to explore our scenarios, risks, and portfolio positioning in detail.
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