Global equities advanced in August, though leadership shifted. The S&P 500 rose 2.0% and the NASDAQ 0.9%, while Canada (+4.8%), Japan (+4.1%) and Australia (+3.1%) outperformed. China’s CSI 300 was the standout, surging 10.5% on heavy liquidity inflows and policy support.
In the US, Materials (+5.6%) and Health Care (+5.2%) led, while IT (+0.3%) stalled and Utilities (-2.0%) lagged, reflecting rotation away from defensives and recent tech leaders.
Australia saw a dramatic growth-to-value rotation. Health Care (-12.9%), hit by CSL’s surprise transformation plan (shares down >16% despite strong earnings), and IT (-1.5%) fell, while Materials (+9.2%), Discretionary (+7.3%) and Financials (+3.1%) drove gains. The monthly value vs growth outperformance of 10.3% is rarely seen outside periods of crisis — the tech bubble, GFC, or COVID-19 — highlighting the magnitude of the shift.
Bond yields were mixed: the US 10Y fell -15bps, Australia was flat, while Europe and Japan edged higher. The USD weakened broadly, led by European currencies, while the AUD also appreciated (+1.8%).
Thought piece - two decisions that matter
The most common question we hear today is: “What do you think about markets here?”
To us, two decisions will shape the future of markets:
Interest rates
AI investment
The long-term destinations feel logical — lower interest rates over time, and AI woven into every part of daily life. But the journey is unlikely to be smooth. Precision or missteps along the way will make or break trillions in value.
Right now, markets appear to assume both journeys will be:
a) short, and
b) successful.
We agree with the direction of travel, but not the pace. The probability of central banks meaningfully cutting rates soon, or US hyperscalers converting massive AI capex into near-term profits, remains low.
Investors should remember: you don’t always need to chase momentum, especially when asset prices and expectations are already elevated.
Our stance
In our dynamic models, we continue to maintain a tactical, defensive posture. We are overweight fixed interest, with bonds offering a more reliable opportunity in the current environment. This positioning delivered positive returns in August, though we lagged some more aggressive peers who were heavily exposed to equities. Importantly, our approach has delivered strong results over the past 12 months, underscoring the value of a disciplined focus on risk management.
At Human Financial, our priority is balancing risk and reward. Right now, we believe the best way to capture long-term rewards is by keeping a clear focus on the risks.