Insights
Market Review for August 2026
Profits pull, and Politics push markets around
International relations could be (much) improved: Trading Tariff blows and Lake names
Down Under: Australasian August angst
Optimists prevailed in August, but further gains need more clarity: what this means for your money
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Markets in August saw a continuation of a blustery mix of geopolitical tensions, policy uncertainty, and economic pressures.
A raft of upcoming elections drove political parties here and abroad to try and match their policy messages with the pressing concerns of voters on social, environmental, and equity issues. There is diminishing patience with the status quo, and many political communities consider the solutions from the incumbent political class to be unsatisfactory. The present global situation is a compelling opportunity for positive change, but social uncertainty also risks a political reaction and/or heightened periods of conflict.
And yet, against this backdrop, equity markets remain in relatively good health, and global corporates have tolerated the turbulence well.
Trading Tariff blows and Lake names
A full-blown trade war erupted between the US and Canada in the tail-end of August, following the breakdown of niggly negotiations that had rumbled on for months. US tariffs worth $20 billion USD were applied with almost immediate effect to some Canadian exports, on top of existing levies. In response, Canada unveiled counter-tariffs on US goods, matching the same rates as those imposed by its neighbour[2].
The bitter neighbourly fall-out once again showed the speed and scale at which Trump is prepared to use US trade policy as a stick for beating trade partners who won’t comply. The US Administration then provocatively “re-christened” Lake Ontario as Lake America, leaving the crucial economic and societal relationship between these neighbours extremely on edge.
In parallel, the US announced punishing new sanctions on Iran and its trading partners[3]. With no sign of a Gulf peace deal in sight, the US turned to its financial armoury in an effort to force the hand of Tehran’s power brokers. The elephant in the room was China, which remains one of Iran’s key trading partners. Questions were immediately asked about whether the US is prepared to sanction its major trading rival as part of this Iranian-focused initiative. Especially given that the President, Xi Jinping, is scheduled to visit the States for key talks in September [4].
For long-term investors, the latest moves by US policy makers needn’t unsettle their established investing strategy. They do, however, add another layer of short-term frictions to the global economy, which is unhelpful. High energy prices for fossil fuel-based transportation and chemicals squeeze profit margins and embed inflation in the system, often hitting hardest those consumers whose incomes are already very stretched. Though the price signal from making people’s standard of living hostage to oil brinkmanship should be to diversify to more sustainable energy production, that takes time, and doesn’t improve things for communities badly impacted by ever-rising food costs. However, in the medium-term, it does narrow the gap between the cost of sustainable and extractive energy production, encouraging more investment in the former.
Ahead of the US mid-term elections in November, the Trump administration will likely be keen to close a number of costly and unresolved global issues. Nevertheless, the US leadership has shown that escalation is often preferred to conciliation, so in summary, we would expect choppier conditions in global asset prices for at least another three months, potentially through until year-end.
Australasian August angst
Meanwhile, in this part of the world, there were further signs that Aussies and Kiwis continue to slog through a difficult economic phase. In August, the Reserve Bank of Australia voted to keep its cash rate target on hold at 4.35%, in recognition of stubborn inflation over-hanging the Australian economy[5].
The RBA’s post-meeting statement left little doubt about the cost pressures currently facing Australian households and businesses: “While the impact of the Middle East conflict on inflation has so far been less than expected, headline inflation is still too high. Oil and most related commodity prices remain higher than they were prior to the Middle East conflict. Some firms experiencing cost pressures are increasing the prices of their goods and services and others are looking to do so[6].
Though there was no rate hike in August, Australia’s resilient activity level and inflation pressure left the Reserve Bank of Australia cautious about declaring their interest rate tightening cycle complete. While the economy has slowed from its heady pace, underlying inflation pressures mean further rate increases cannot yet be ruled out.
That factor weighed on Australian bond market in August, but the higher world prices for minerals and materials was a boon to the Australian share market, which saw double-digit gains in the Resources sector. This offset weakness in Australian Real Estate and Consumer companies, which were both hit by interest rate worries and a less upbeat national mood – though, Antipodean winter blues could also be a factor.
In New Zealand, the economic recovery continued to gradually regain traction following the interruption from the war in Iran triggering higher fuel prices and stalling activity briefly[7]. That is reinforcing market expectations that the NZ Official Cash Rate needs to move back towards a more neutral setting above 3% [8] as the recovery becomes established, although the pace of further tightening will depend on how much election uncertainty and government policy risks impact activity in the later part of this year.
The thin line between wanting to tame inflation and not stifling economic growth remains a key challenge for policymakers on both sides of the Tasman. Expect the Reserve Banks to tentatively tighten on tip-toes, only.
What this means for your money
As we move into the final months of 2026, investors are likely to face pockets of short-term uncertainty. There appears no willingness within the US government to conciliate, and the bond market is sending strong signals that investors disapprove of reckless or inflammatory gestures when inflation is already running high. Higher interest rates are now baked in for many countries, but that is not entirely negative and presents its own set of opportunities.
That said, September typically sees market swings, and sentiment often cools at this time of year before resolving, even if that involves a degree of healthy re-assessment or re-evaluation of risks. Remaining composed and relying on a careful portfolio selection and active vigilance can bring longer-term rewards, even when the immediate future appears tense. When political noise is so elevated, concern is natural, but the adaptability and quality in your investment portfolio is designed to shield it from any enduring capital loss, without either compromising on ethics or jumping onto unsustainable market bandwagons.
Sources & further reading
Sources and references
[1] S&P 500 Index August 1-month return was +2.72% in USD terms. Source: S&P Dow Jones Indices.
[3] Source: https://edition.cnn.com/2026/08/25/business/us-sanctions-iran-oil-china
[4] Source: https://www.politico.com/news/2026/08/17/xi-jinping-skip-unga-trump-summit-01039237
[5] Source: https://www.rba.gov.au/
[7] https://www.rnz.co.nz/news/business/1100999/us-iran-war-wounds-nz-consumer-spending
[8] Source: RBNZ Survey of Expectations, 13 August 2026https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/statistics/series/m/m14/insights/2026/survey-of-expectations-august-2026.pdf
