TWD Monthly Market Update – August 2026
Broader Market Moves1
Macro Commentary
Financial markets delivered mixed returns during July, with Australian equities outperforming their US counterparts. The S&P/ASX 200 rose 2.26% on a total return basis during the month, while the S&P 500 was broadly unchanged, declining 0.06% in US dollar terms.
Within Australia, sector performance was highly uneven. Energy was the strongest-performing sector, rising 12.21%, followed by Financials, which gained 5.84%. Healthcare also performed strongly, rising 2.27%, while Communication Services and Consumer Discretionary recorded more modest gains. In contrast, Information Technology was the weakest-performing sector, falling 2.79%, while Industrials, Utilities and Materials also declined. The strength in Energy occurred alongside a sharp rise in Brent crude oil prices during July, as ongoing US-Iran hostilities and restricted shipping through the Strait of Hormuz continued to affect global energy supplies.
Domestic economic data remained an important focus during July. Inflation showed further signs of moderation, with Consumer Price Index data released by the Australian Bureau of Statistics showing annual headline inflation easing to 3.8% in June from 4.0% in May. However, underlying inflation remained more persistent, with trimmed mean inflation unchanged at 3.6%. Labour Force data released by the ABS showed employment increased by 76,300 positions in June, while the unemployment rate remained at 4.4%, indicating that labour market conditions remained relatively resilient.
International markets were more subdued during July. The S&P 500 finished the month broadly unchanged, declining 0.06% on a Total Return basis following stronger gains during the June quarter. Investor attention increasingly shifted towards the US corporate reporting season and, in particular, the scale of artificial intelligence investment and whether earnings growth could continue to support elevated capital expenditure.
The artificial intelligence investment cycle remained an important influence on global equities. Late in the month, results from several large US technology companies provided further evidence that investment in data centres, cloud infrastructure and AI-related computing capacity remained elevated. Microsoft reported strong cloud growth and continued cash generation alongside substantial AI investment, while Amazon reported its strongest cloud revenue growth in more than four years. The results provided further evidence of strong demand for cloud and AI-related infrastructure, although investor scrutiny of the scale and returns from capital expenditure remained elevated.
US economic data remained mixed but continued to point to an expanding economy. Gross Domestic Product data released by the U.S. Bureau of Economic Analysis showed the economy grew at an annualised rate of 1.5% in the second quarter, moderating from 2.1% in the first quarter. Growth was supported by consumer spending, investment and exports, although the overall pace of expansion slowed. Employment Situation data released by the U.S. Bureau of Labor Statistics showed non-farm payrolls increased by 57,000 in June, while the unemployment rate was 4.2%, indicating that hiring momentum remained subdued. Consumer Price Index data released later in July showed headline CPI declined 0.4% in June, largely reflecting a 5.7% fall in energy prices, although annual inflation remained at 3.5%. Core inflation, which excludes food and energy, was 2.6% over the year. The Federal Reserve left the federal funds target range unchanged at 3.50%–3.75% at its July meeting, noting that economic activity continued to expand at a solid pace but inflation remained elevated relative to its 2% goal. The decision was made by a 9–3 vote, with three members preferring a 25 basis point increase. More broadly, Chair Kevin Warsh has signalled a reassessment of how the Federal Reserve conducts monetary policy, including its use of economic data, approach to inflation and the potential implications of artificial intelligence for productivity and employment.
Commodity markets experienced renewed volatility during July. Brent crude oil rose approximately 24% over the month, finishing at US$90.12 per barrel as ongoing US-Iran hostilities and restricted crude flows through the Strait of Hormuz continued to affect global energy supplies.5 The sharp increase reversed much of the decline recorded during June and again brought the potential inflationary impact of higher energy prices into focus.
Gold prices were comparatively stable over the month, despite periods of volatility as investors responded to changes in interest rate expectations and geopolitical developments. Prices remained elevated by historical standards, with gold finishing July at approximately US$4,050 per ounce.
Looking ahead, July highlighted the competing forces continuing to shape financial markets. Australian equities rose during the month, with Energy and Financials leading sector gains, while US markets consolidated following the strong gains of the previous quarter. Attention remains focused on the durability of the artificial intelligence investment cycle, the path of inflation and interest rates, and geopolitical risks surrounding global energy markets. Against this backdrop, maintaining diversified portfolio exposures and focusing on high-quality businesses remains important as markets navigate an environment characterised by uneven growth, elevated valuations and persistent policy and geopolitical uncertainty.
1ASX 200 refers to SPDR S&P ASX 200 Fund (STW), S&P 500 refers to iShares S&P 500 (AUD Hedged) ETF, MSCI World refers to Vanguard MSCI Index International Shares (Hedged) ETF, NASDAQ 100 refers Nasdaq 100 Currency Hedged ETF, AU Comp refers to the Vanguard Australian Fixed Interest Index ETF, Global Agg refers to Vanguard Global Aggregate Bond Index (Hedged) ETF, Gold (USD) refers to the LSEG Gold Spot Price (USD)
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