<p>Check out the main perspectives for the global economy and markets. Marina Valentini, Global Market Strategist, highlights the main themes and concerns that impact investors and their decisions, based on information from Guide to the Markets – Latin America.</p>

Global economic activity remained resilient in August, with developed market business activity accelerating to its fastest pace since early 2022, led by a pickup in services. The U.S. continued to lead the expansion, while growth improved across Europe and Japan. In China, manufacturing activity improved but remained in contraction, as strong exports continued to offset weak domestic demand. Meanwhile, developed market central banks continued their cautious stance in August, as resilient growth and persistent inflation pressures kept policymakers focused on the risk of further tightening. In the U.S., markets increasingly debated the prospect of another Fed hike, with the market pricing a 60% chance of a rate hike in September and at least a full rate hike by December. Front-end yields drifted higher after Fed Chair Warsh noted in his Jackson Hole keynote that recent U.S. inflation data had not meaningfully improved.  Elsewhere, the BoJ, BoE, and ECB are all expected to hike rates at least once by the end of the year, with the market also pricing in a second rate BOJ hike in January 2027. Currency pressures added another dimension to the policy backdrop in Japan, where the impact of July’s coordinated U.S.-Japan intervention to support the yen faded through August, ending the month slightly below 160/USD, increasing pressure on the Bank of Japan to tighten policy further. Meanwhile, elevated fiscal deficits and rising government borrowing needs remained an important source of upward pressure on long-term yields across developed markets. 

Global sovereign yields remained elevated in August as investors continued to weigh inflation risks, fiscal deficits and rising government debt burdens. In the U.S., a selloff pushed the 30-year Treasury yield to 5.34%, its highest level since 2007, prompting the Treasury to double the size of planned buybacks of longer-dated government debt to at least $4 billion per operation. The announcement provided some near-term relief to yields, but the relatively small size of the purchases suggests that concerns around deficits and elevated Treasury supply are likely to remain important drivers of the long end of the curve. Globally, yields increased 10bps, ending the month at 4.06%. Higher-quality, short duration credit continues to look attractive, as the markets are pricing in at least one full rate hike by the end of the year by all four major central banks. In this environment, where yields are appealing and the policy path is still uncertain, active fixed income management remains well-positioned to add value.

Earnings season ended even stronger than originally expected. In the U.S., 2Q26 earnings grew by around 50% year over year, or roughly 37% adjusted for one-time hyperscaler equity gains. The artificial intelligence trade was back in focus, with the global semiconductor index rising more than 10% since it’s low in late July. Similarly, global equities continued to advance in August, with the MSCI World rising 2.4% and the S&P 500 2.7%. Emerging markets and Japanese equities continue to lead global markets, as both rose more than 3% and are up 24,4% and 21,1% year to date, respectively. The flight back into the AI/semiconductor trade left European equities lagging slightly, rising less than 1% in August, yet still up an impressive 12.4% this year.  Higher oil prices and higher long term yields could add pressure to equity markets, but the impressive earnings growth seen this past quarter and expected ahead should continue to underpin performance.

Looking ahead, September will be an important month for monetary policy, with the Fed, ECB, BoE and BoJ all scheduled to meet as policymakers balance resilient growth against persistent inflation pressures. With uncertainty around the path for rates likely to remain elevated, investors should expect continued bouts of market volatility. Against this backdrop, staying invested and maintaining diversified portfolios remains key, while active management can help investors navigate shifting market leadership and uncover opportunities across regions, sectors and asset classes.