World equities advanced in August, with the global MSCI All-Country World Index gaining around 1.7%, supported by exceptionally strong earnings, resilient economic data and renewed momentum in AI-related investment. Since the beginning of the year, the global index has risen so far 15.6%, or more than three times its return for the entire 2025. (all returns in EUR).  The monthly rally was notable because it occurred against a difficult macro backdrop: the 10-year US Treasury yield moved above 4.8%, oil traded near $90 per barrel, the US–Iran conflict intensified, and investors faced renewed concerns about inflation and tighter central-bank policy. In the US, equities rebounded as the second-quarter earnings season exceeded expectations, with projected 2026 S&P500 earnings growth rising to 31%; double the estimate at the start of the year. Even more striking, US large-cap Technology earnings were expected to grow by 55%, underlining the continued strength of the AI investment cycle – although investors became more selective about which companies would ultimately become long-term winners. European stocks also delivered positive returns, helped by stronger earnings expectations and renewed growth-stock momentum, but the region lagged amid higher bond yields and elevated energy prices. Stocks in the United Kingdom slightly contracted, as household energy costs drove headline inflation higher. Commodities added another interesitng dimension to the month: gold jumped around 10% to a three-month high; agricultural prices rose on El Niño (a damaging weather phenomenon) and supply-risk concerns; oil prices remained high on geopolitical fears… and Materials became the top-performing global equity sector. Emerging markets outperformed developed markets, despite weakness in traditional heavyweight markets like China, India and Brazil. China’s rebound faded quickly despite rising AI-related IPO activity, while India underperformed despite the strongest foreign buying in 23 months on its markets. The broader pattern was unusual: investors rewarded AI and semiconductors (Taiwan, Korea) but also precious and industrial metals – South Africa was the top-performing emerging markets country for the month, posting double-digit returns, as it benefited from gold’s rise. August was a difficult month for global bond markets, as rising yields again limited fixed income’s diversification role in the investors’ portfolios. The Global Aggregate Bond Index returned 0.5% (in USD), though local currency returns varied as the US dollar weakened. As investors took a harder look at America’s fiscal and monetary stewardship, the US dollar fell to a three-month low. Indeed, the most striking move came in US long maturities, where the 30-year Treasury yields touched 5.31%, the highest level in almost two decades, before easing after the Treasury announced larger buybacks. This raised uncomfortable questions about policy credibility at a time when the Fed was still stressing inflation discipline. Japanese government bond yields were amongst the worst performers over the month, with 10-year JGB yields rising to 2.95% (a 30 year high!) amid renewed inflation pressure and speculation over Bank of Japan further tightening. Coordinated US-Japan foreign exchange intervention to support the yen (selling US dollars and buying yen) offered only temporary relief. In contrast, credit markets remained remarkably resilient, with high yield spreads narrowing to a 12-month low, and emerging market debt benefited from a softer US dollar. Overall for the month, in August we saw risk assets rise despite several normally negative shocks, suggesting that earnings momentum and AI-related capital spending remained powerful enough to offset higher rates, geopolitical stress and looming inflation risks.
     August delivered strong US equity gains, but the rally was notable for its narrow and uneven character. The flagship S&P500 rose 2.7% to new highs, yet leadership remained concentrated in AI-linked mega-cap names, with even the semiconductor sector showing sharp divergence: Nvidia gained around 10%, while Broadcom declined. The big-tech concentrated Nasdaq100 index rose more than 4% for the month. The limited market breadth was unusual for the solid macro data. The US Composite PMI reached a 52-month high, reinforcing the view that growth was still solid, but the equal-weighted S&P500 lagged the cap-weighted index, showing that gains were concentrated in the largest companies rather than spread across the market. Sector moves also looked unusual: Energy, Technology and Materials led for very different reasons. Technology benefited from AI infrastructure demand, Energy was supported by firmer oil prices linked to Middle East supply concerns, and Materials gained from exposure to industrial activity and commodity demand tied to technology supply chains. By contrast, Utilities and Industrials lagged amid higher yields and weaker relative earnings momentum. The most unsettling contrast was between record equity prices and the rising macro stress. US debt exceeded USD 40 trillion for the first time, the deficit stayed near 6.3% of GDP, and the 30-year Treasury yield reached a 19-year high. Despite this valuation pressure, earnings strength kept the market moving higher. Earnings optimism was exceptional: expected full-year S&P500 profit growth for 2026 reached 31%, more than double the start-of-year forecast. Interstingly, every S&P500 sector was expected to post positive earnings growth, suggesting broaderfundamental support beneath the AI-driven headline. US bonds delivered only a modest positive return in August, but the details were more striking than the headline number. Short-dated Treasury yields moved higher after Fed Chair Warsh signalled that inflation had not improved enough to justify a softer policy stance, while the long end behaved differently: the 30-year yield briefly reached its highest level since 2007 before ending the month lower after the Treasury announced a sharp increase in long-dated bond buybacks. The most unusual development was in corporate credit. Spreads barely moved despite record August IG issuance of more than $145 billion by 24 August, with AI-related companies driving the largest share of supply. This potentially shows that investor demand for fixed income remains strong, even as valuations looked stretched and the market is exposed to higher rates, heavy issuance and geopolitical shocks. In short, investors remain on the edge: on one side, record equity prices and solid growth are being supported by heavy AI investment, while fiscal concerns, pressured consumers, above-target inflation and a weaker dollar remain important risks.
    European stocks reached new highs in August, with the pan-European STOXX600 equity index rising for a fifth consecutive month (0.3% in EUR). The market demonstrated curious resilience: earnings held up and growth indicators improved despite numerous adverse factors like persistent inflation, higher energy costs, tighter credit conditions, geopolitical risks and renewed uncertainty around interest rates. Performance was uneven beneath the headline gains though. Information technology, Communication services and Financials led the eurozone market, with software standing out as a particularly strong area. In contrast, defensive sectors such as Real estate, Utilities and Consumer staples posted negative returns, an unusual pattern given the still-uncertain macro backdrop. The macro picture was strikingly contradictory. Eurozone inflation remained well above target at 2.9%, keeping expectations almost certain for an ECB rate increase in September, yet the flash PMI still edged up to 52.1, helped by stronger manufacturing activity. This combination of sticky inflation and improving activity supported equities but left markets sensitive to tighter policy. Country-level developments was somewhat divergent. While Europe as a whole was positive, the UK market lagged other regions, as higher household energy costs pushed inflation to a four-month high. European bond markets weakened in August as yields rose across most curves, driven by a hawkish ECB, higher energy prices and expectations of further rate hikes. The unusual point was that yields climbed despite better inflation data and signs of improving German activity, indicating that investors are more nervous about policy risk than soothed by early disinflation signals. Germany’s 10-year Bund yield reached a fresh cycle high of 3.32%, while core and peripheral yields across Europe rose to levels not seen in over a decade. French government bond yields rose to their highest level since the financial crisis as investors focused on difficult budget talks and the upcoming presidential election. UK gilts were positive in total-return terms, but long-end yields remained under pressure at levels last associated with the 1990s as markets priced more Bank of England tightening. Overall, on the European financial markets August saw the sharp clash between hesitant macro improvement and persistent pressure from energy prices, fiscal risks and central banks.
    The month of August was very positive for the shares on the Bulgarian Stock Exchange (BSE). All indices on the BSE ended mightily up for the month! The flagship equity index SOFIX rose by over 9%; the broad BGBX40 – by nearly 8%, and that of small companies, beamX – by 8.5%! The increased interest and activity of individual investors, combined with a favorable macro environment, continue to improve the liquidity and depth of the domestic stock market. In August began the trading of the first bond issue on the EuroBridge market, allowing double trading. The bond issue of Starcom Holding AD, worth EUR 200 million, can now be traded on the markets in Bulgaria and Frankfurt. Another positive development for the month was the increase in the ceiling for raising capital from Bulgarian companies through the growth market for small and medium-sized enterprises, Beam, from EUR 8 million to EUR 12 million. At the moment, a total of 19 issues of shares and 7 bonds are traded on this beam market. Among the large companies that performed best for the month is the financial holding Doverie UH AD with nearly 35% return, while the one that fared worst was the technological Sirma Group AD, whose shares lost 2.4%.

Sources: Bloomberg, BSE