Monthly Review and Outlook August 2025
Global markets continued to make steady progress in August, helped by strong company earnings, easing inflation, and growing hopes that interest rates may soon come down. Many high-quality corporate bonds also performed well, as more companies reported better-than-expected results. However, returns from government bonds were mixed, reflecting ongoing concerns about how some major economies are managing their finances.
Below is a review of key developments across global markets and our outlook for the months ahead, highlighting opportunities and potential risks.
Company shares
Global equities posted gains in August, with developed markets rising 2.6% and Japan leading performance. Emerging markets also delivered positive returns, supported by Latin America and China.
- United States: US shares increased, even though job growth was weaker than expected and inflation remained a concern. The US central bank (the Federal Reserve) suggested it might lower interest rates soon, which helped boost confidence. Companies in materials (like mining and chemicals) and health care did particularly well, while technology shares had a quieter month.
- Europe: European shares made small gains. Energy companies and car makers did well, especially after a new trade agreement with the US. However, some industrial and technology companies saw their share prices fall. Political uncertainty in France affected its stock market towards the end of the month.
- United Kingdom: UK shares also rose, with telecoms, mining, and energy companies leading the way. Technology shares fell, following a global trend. The Bank of England cut interest rates slightly, but higher-than-expected inflation means further cuts may not happen soon.
- Japan: Japanese shares continued their strong run, helped by good company results, steady economic growth, and moderate inflation. Companies linked to artificial intelligence (AI) also did well.
- Emerging Markets: Shares in developing countries went up, helped by a weaker US dollar (which makes it easier for these countries to trade). Latin American countries like Brazil and South Africa performed strongly, while China benefited from progress in trade talks. However, some countries, such as Taiwan and Korea, saw their markets fall due to worries about technology companies and taxes.
Bonds
Bond markets had mixed results in August, as investors reacted to economic news and political events.
- US Bonds: The return on US government bonds improved early in the month after weak job numbers, as investors expected the central bank to cut interest rates soon. Short-term bonds did better than long-term ones, which were affected by worries about government spending.
- European Bonds: Returns on European government bonds fell, as investors expected interest rates to stay the same and worried about government spending in countries like Germany and France.
- UK Bonds: Returns on European government bonds fell, as investors expected interest rates to stay the same and worried about government spending in countries like Germany and France.
- Corporate Bonds: Bonds issued by companies generally performed better than government bonds, helped by strong company results and less concern about tariffs.
Commodities
The main index for commodities (things like oil, gold, and coffee) fell slightly in August. Oil prices dropped after forecasts for demand were lowered, while coffee prices jumped due to poor weather in Brazil and worries about tariffs. Gold remained popular with investors, as many expect US interest rates to fall soon.
Outlook
Strong company results, lower inflation, and progress in trade talks have helped reduce uncertainty and boost investor confidence. Although we continue to see good opportunities in global shares, we have taken profits on our equity positions following a strong period of returns. We remain cautious about government bonds, as we believe there are better opportunities elsewhere.
Asset overview
Our general view of assets in the coming months is summarised as follows. These are our in-house views as at the end of July 2025.
| Asset | RAG Status | Details |
|---|---|---|
Equities | Amber | We have adjusted our outlook on equities, moving from a positive stance to a more neutral one. This change reflects concerns about high valuations and market uncertainty. As a result, the Tactical Funds have reduced their exposure to US, European (ex UK), and Emerging Market equities, and have closed positions in US Financials and US Healthcare. |
Government bonds | Red | We are cautious about government bonds, as we see better opportunities in other areas. |
Corporate bonds | Amber | We maintain a neutral stance on corporate bonds. |
Commodities | Green | We retain a positive stance on gold which continues to serve as a diversifying hedge against inflation and inflation uncertainty. |
Source: Schroder Investment Management and Schroders Personal Wealth, 9 September 2025.
RAG Status legend
Green - Positive outlook
Red - Negative outlook
Amber - Neutral outlook
Important information
Forecasts of future performance are not a reliable guide to actual results, neither is past performance a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and are not guaranteed, and the investor might not get back their initial investment.
Any views expressed are our in-house views as at end-July 2025. Investment markets and conditions can change rapidly, and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.
Schroders Investment Management (SIM) provides investment management and advice services for Lloyds Wealth funds and portfolios respectively.
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