WHY DO STOCK MARKETS KEEP GOING UP?
Signia Invest Insights | August 2025
Market Review and Outlook
- Performance of risk assets in August continued to be very positive, for the fifth month in a row, which is rather unusual from a historical seasonal perspective. This puts market performance year-to-date near the upper end of the annual performance trajectories of the past 30 years. World equities rallied another 2.4% to bring their year-to-date return to 13.1%, led by China A-shares and the Japanese Nikkei, gaining 10.3% and 4.0%, respectively. The continuation of the global equity rally was in large part due to a dovish pivot by Fed Chair Powell at the annual Jackson Hole symposium, which led to growing expectations that the central bank would cut rates in September. Powell highlighted the challenges the Fed faces but also opened the door to easier monetary policy: “Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance… Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
- There were still several headwinds, including concern about the Fed’s independence that led to higher inflation expectations and steeper yield curves in bond markets. Despite this, fixed income markets also continued their ascent with the global bond aggregate generating a 0.6% total return in August, led by riskier segments of the market in high yield bonds and emerging market local sovereigns. Additionally, gold continued its march higher, rising 4.6% during the month to an impressive 31.4% YTD, buoyed by a declining interest rate environment, a stubborn core inflation backdrop in many key global economic regions, and persistent geopolitical risks around the world.
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