Cirilium Passive monthly commentary – Review of August 2026

At the end of August, we once again highlight the strength of markets so far this year and note the underlying robustness of corporate earnings. Seasonally, we know that the autumn can often be a trickier time for markets, but below are the fundamental questions we are asking ourselves.

Growth or inflation?

While corporate earnings have done a lot of heavy lifting, the macro backdrop might give an indication of where we go next, particularly as it relates to policymaker focus. AI-related growth has boosted economic activity, but it is unclear how persistent this will be or whether it could force a contraction in the labour force. Alternatively, if the conflict in the Middle East escalates it could increase inflationary pressures. So far, there have been some small indications of higher inflation, but nothing like what occurred in 2022.

How high can rates go?

As interest rates and bond yields move higher, it is interesting how unconcerned equity markets have seemed. Rising rates might suggest investor reallocation to bonds (as they start to be able to earn similar rates of return with lower risk). It is especially interesting given how fiscally stretched all the major economies are and given the risk that government borrowing crowds out the huge borrowing requirements of the big AI companies.

Will investors keep riding the AI-wave?

The corporate picture really has kept the show on the road, and investors have been well rewarded by continued economic expansion and robust earnings growth. As growth rates start to decline, it will be interesting to see whether investors remain as enamoured with these companies.