Market Matters – Is Goldilocks Making a Comeback?

• Global markets continued to broaden in August. Japan led regional returns, while the S&P 500 and Nasdaq recorded a third consecutive weekly gain. However, earnings and investor flows remain more concentrated than market performance suggests.
• US inflation eased, with headline CPI at 3.4% and core CPI at 2.5%. The probability of a September Fed rate increase fell to around one-third, although underlying producer-price pressure, weaker retail sales and high long-term real yields remain concerns.
• AI investment continues to support global earnings across servers, networking, power, memory and industrial infrastructure. Investors are now paying greater attention to funding, utilisation and whether this spending ultimately produces sufficient cash returns.
• Regional conditions remain mixed. European earnings were stronger than expected, UK growth remained resilient and Japanese inflation increased the prospect of tighter monetary policy. China’s record credit contraction continued to highlight weak household and property demand.
• Brent crude rose 6% to $88.52 as disruption around the Strait of Hormuz increased. A sustained rise in oil prices would weaken household spending, raise inflation expectations and make central-bank policy more difficult.