Monthly Report August 2026

Despite ongoing geopolitical tensions and the recent escalation in the Middle East, most global equity markets have continued to gain over the past few weeks. This was driven by strong quarterly and half-year results from many companies, the positive impact of AI investments, and generally solid economic data.

Held back by the negative performance of index heavyweights Novartis, Nestlé, and Roche, the Swiss Performance Index (SPI) dipped slightly by 0.3%. In contrast, the DAX (in EUR), the MSCI World global equity index, and the MSCI Emerging Markets index (both in USD) rose by 2.5%, 2.6%, and 3.4%, respectively.

Oil prices fluctuated sideways in a broad range around the USD 90 mark, tracking news flow regarding the war in Iran. It is estimated that by the end of August, around two-thirds of pre-war export volumes from the Gulf region will be restored, which is having a dampening effect on price trends. Nevertheless, inflation in the Eurozone rose from 2.9% to 3.3% in August. Under this pressure, yields on German government bonds climbed to over 3.3%, their highest level in 15 years. As 10-year interest rates in USD and CHF moved sideways, bond indices remained stable.

Reaffirming the US inflation target and purchasing long-term government bonds

New Fed Chair Kevin Warsh used his first major speech at the Jackson Hole meeting in late August to take a much clearer stance. He reaffirmed the 2% inflation target as a "firm, immovable" benchmark and described the current PCE (Personal Consumption Expenditures) inflation—the US Federal Reserve's preferred indicator for managing monetary policy and interest rates—at 3.7% as concerning. In doing so, he signaled more clearly than ever that an interest rate hike could be imminent if inflation dynamics do not ease.

In response to his remarks, the priced-in probability of a 0.25% rate hike at the next central bank meeting in mid-September rose from around 35% to nearly 70%. One rate hike is currently priced in by the end of the year, whereas at the beginning of the year, the market had still been expecting two 0.25% rate cuts.

Because yields on 30-year US Treasury bonds reached 5.3%, their highest level since the summer of 2007, the Treasury Department announced it would significantly expand its liquidity-supporting buybacks of long-term government securities. From September 9 until at least the end of the current refinancing quarter on November 4, the maximum purchase volume for the generally weekly transactions in the 10-to-20-year and 20-to-30-year maturity segments will increase from two to at least four billion US dollars. Many market participants have interpreted this as a signal that the government is prepared to intervene at the long end of the yield curve to dampen further interest rate increases.

Fund and mandate performance

Most of our portfolio companies have now presented their half-year reports and have met, and in many cases exceeded, expectations. Nevertheless, the results have so far been met with a rather cautious response from the market.

The Swiss mid- and small-cap equity segment saw the strongest growth with a gain of 1.9%, while Swiss equities and Swiss equities flex also achieved positive performance. Among the mixed portfolios, Format Balanced International performed best with a value increase of 2.4%. Most other mixed mandates were also able to outperform their benchmarks. The performance of the funds and mandates year-to-date can be accessed via the link below.

Outlook

In addition to developments in the Middle East, the interest rate decisions of the major central banks will take center stage in September. The market currently expects a 0.25% rate hike from the European Central Bank (ECB). For the US Federal Reserve, the labor market report due in early September and the latest inflation data will likely determine whether a rate hike occurs, while the Swiss National Bank (SNB) is expected to keep its key interest rate unchanged.

Best regards,
Matthias Hug and Markus Lackner

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