August 2026

“The impetus of existing plans is always stronger than the impulse to change.”  Barbara Tuchman

Risk assets have largely been driven by a unifying theme for most of the year, namely a prolonged AI Capex boom measured in the trillions of dollars, underpinned by accommodative monetary policy and stimulative fiscal policy.  At the same time, lingering inflationary pressures, geopolitical conflicts and a darkening political picture have been simmering through the summer, something is likely to give.  Trends rarely change on their own, but higher interest rates are the most important catalysts.  It is often mentioned that in the 1990s US stocks rose for three more years after Alan Greenspan’s irrational exuberance speech, but most forget that the Fed didn’t start raising rates until mid-1999, and the bubble burst within nine months.  Looking forward towards year end, markets will be tested by higher rates in a number of economic areas, and this will be the ultimate test of bullish resolve.

Beyond the macro issues it was generally a typical August, with a positive bias for stocks and a negative one for bonds.  Economic data did not largely deviate from recent trends but was slightly more benign in the US and EU.  These trends were also evident in European financials, which were also supported by results and continued speculation about further consolidation.   Continued deal flow and volatile markets would suggest that Q3 results will once again be positive, but ultimate market impact will more likely be subordinate to macro factors.

For the month, the fund’s A shares gained +0.30% with gross contributions of 0.58% from credit and -0.18% from equities.  Readers will know that we have been positioned to retain portfolio flexibility for some time, and we remain committed to this course in the current circumstances.