Qualis Market Update – 10 August 2026

The News

The end of July saw the Bank of England decide to hold rates for the fifth meeting in a row, keeping them at 3.75%. This was despite a recent fall in inflation with the central bank’s monetary policy committee preferring to ‘wait and see’ with the continuing Middle East conflict and how this impacts the UK. Governor Andrew Bailey warned that UK interest rate decisions would depend on what happened with the US war against Iran and, at the time of writing, this has reignited. The ceasefire agreement struck a few weeks ago has been abandoned though there are repeated reports of talks to reopen the Strait of Hormuz. However, President Donald Trump has indicated he is inclined to step back from negotiations and let Iran be pressured by its own rising inflation.

That said, the economic news reported in the US hasn’t been that much more positive. Last week saw surprising US unemployment data being revealed, a heavily watched metric by many economists. It was reported that the US economy lost 23,000 jobs in July while many had been expecting 80,000 new jobs to be created. For context, average job creation over the latest three months has been only around 20,000 per month which gives an idea of how productive the US economy is right now. Although US unemployment fell in July to 4.1%, labour-force participation also declined again to 61.4%. This significantly weakens the case for a September Fed hike and has pushed Treasury yields lower. However, it doesn’t make the news unequivocally bullish: the market may simply be exchanging an interest-rate risk for an economic-growth risk.

Market Movements

The past two weeks have seen an upturn in some major equity markets as some fears have eased, as talks involving Iran and Oman helped lower energy prices and raise some hopes. The S&P 500 raise from around 7,300 on 29 July to over 7,570 as of 7 August – similarly the Nasdaq went from around 24,400 to nearly 26,700 in the same period. For perspective the brent crude price fell from $90 to $83, where it has balanced out over the past few days. The FTSE 100 didn’t rally as much during this time but still trended upwards a few percentage points, with investors still buoyed by apparent geopolitical stability and improving inflation.

However, in the US it’s important not to confuse equity market behaviour as an automatic investment signal. Last week there were some solid earnings (from the likes of Caterpillar and Siemens) which shows AI infrastructure spending remains strong. That makes us less concerned about an imminent collapse in AI demand. However, valuation, concentration and the enormous capital commitments required remain risks. We want to retain some AI participation but not undo the diversification we’ve already established.

Over the past two weeks, US bond markets have experienced volatility driven by shifting inflation concerns and the already-mentioned July jobs report. 10-year Treasury yields hovered around 4.65%–4.66%, while long-term bonds faced pressure and short-term yields reacted to shifting rate-hike probabilities. At the same time, UK gilts experienced minor upward pressure on yields, with 10-year yields hovering around 4.92%–4.93% after touching a three-week low near 4.89% in early August.

Looking Ahead

Given the US stock market is saying one thing and the underlying job creation of the country’s economy is saying another, we’re closely watching what happens next with economic data. The next test is inflation.

This Wednesday, US CPI data is due to be released, and this has now become particularly important. A softer number after the recent employment figures would give the Fed considerably more room to manoeuvre and potentially support both bonds and rate-sensitive equities. If inflation came in a lot hotter and higher though, this would be much more problematic. In a nutshell, weakening employment combined with persistent inflation is precisely the combination that markets don’t want. Closer to home, an update on UK GDP activity on Thursday will also provide an important insight into how our own growth and inflation tensions are developing.

Disclaimer

This article does not constitute investment advice or an offer to sell or a solicitation of an offer to buy the products described within. You should consult your financial adviser before making any decisions.

Please note that any performance figures are provided for information purposes only and are not to a guide to future returns. The performance of your own investments may deviate due to a number of factors, including product charges, the timing of contributions & withdrawals and portfolio rebalancing.