WealthSelect Managed Active monthly commentary - Review of August 2026

Over the past month, the balance of market risks has shifted rather than eased. The renewed escalation in the Middle East has pushed energy prices higher, while a sharp rise in global government bond yields has underlined concerns around inflation, heavy government borrowing, and the durability of fiscal policy. At the same time, corporate earnings have remained broadly supportive, leaving investors to weigh resilient fundamentals against a more demanding backdrop for interest rates and valuations.

Energy shock puts inflation progress at risk

The recent moderation in inflation is being tested by another energy shock. The ongoing conflict between the US and Iran has disrupted traffic through the Strait of Hormuz and pushed oil prices up. If sustained, higher energy and transport costs could feed into a broader range of goods and services, complicating the disinflationary trend. Tariffs, deglobalisation, and increased defence spending may also prove more persistent inflationary forces than previously assumed. Food prices remain another potential pressure point.

Bond markets raise the pressure on policymakers

Government bond markets have become less forgiving. Long-dated yields have risen across the UK, US, and Japan amid higher borrowing, persistent inflation uncertainty, and reduced central bank support. In the UK, the sell-off has raised debt servicing costs and limited the government’s room for manoeuvre ahead of the Autumn Budget, putting market credibility under greater scrutiny. In the US, higher oil prices and resilient economic activity have complicated the Fed’s next move, increasing the risk that rates remain higher for longer.

Resilient earnings face a tougher test

Earnings have remained resilient, with profit growth broadening beyond the largest tech companies. However, higher bond yields challenge equity valuations, while rising energy costs may pressure margins in exposed sectors. Strong AI investment and data centre demand remain supportive, but investors are increasingly focused on monetisation, cash flow, and the uneven impact of disruption. This should favour companies able to deliver durable earnings, reinforcing the importance of diversification and active management.