Equity markets continue to climb, reaching new highs. For example, the US market represented by the S&P 500 Index posted five new closing highs during August. Catalysts for this are strong corporate earnings, moderating inflation, and the promise of lower interest rates. Similarly in fixed interest, investment-grade credit (SBS Wealth only invests in investment-grade or higher fixed income) posted solid gains, propelled by the number of companies whose earnings beat analyst estimates.
US markets were buoyed by the anticipation of the Federal Reserve (Fed) Chair Jerome Powell cutting interest rates in mid-September. This is on the back of a weakening labour market. The main benefactor of this was small sized companies, reversing some losses earlier in 2025, while the mega cap stocks had a much quieter month.
The Healthcare sector turned around a tough first six months of 2025 to post returns over 5% for August. Returns were boosted by investors responding to attractive valuations and some favourable company-specific news.
Information Technology underperformed the broad market for the month. While the IT sector has had an exceptional year, some of that momentum might have been at least temporarily short-circuited by a report from the Massachusetts Institute of Technology that found 95% of corporate generative AI pilot projects failed to deliver a measure financial return (although it noted the failure often resulted from poor execution rather than the technology itself).
Japan was one of the top performing regions as sentiment was high around softer US payrolls, resilient domestic corporate results, and improved consensus estimates. Q2 GDP returned to growth and July inflation data confirmed a continuing shift toward moderate inflation. Together, these factors supported market strength, while AI-linked data-centre demand added momentum to related Japanese companies.
All the models were positive again, on the back of strong global equity and domestic equity returns, and also due to positive returns from fixed interest. The three month returns continue to range from 3% up to 10%, with the models with more growth assets (e.g. 98/2, 80/20) higher than the conservative portfolios.
