September monthly investment update - Reflections on August 2026

After months of relentless extreme heat, many of us, no doubt, felt relieved as weather conditions finally eased towards the end of August, bringing much-needed rainfall to parts of the UK.

The latest Met Office figures show that over the summer period (June, July, and August), the UK experienced five widespread heatwaves, amounting to 40 days of temperatures reaching above 30 degrees Celsius - the hottest period on record so far.

This summer we have seen more of the impact on our weather from what scientists call 'human-caused climate change'. It could explain the extreme heat the UK experienced, along with the record-breaking temperatures which engulfed parts of Western Europe – the most severe ever recorded there.

The immediate impact of extreme heat, is, of course, on people’s health. But it also has wider economic consequences, including potentially lower economic outputs (GDP growth) and possibly, a rekindling of inflationary pressures.

For example, crop harvests may have failed in some countries, which could cause supply chain disruption meaning a reduced availability of everyday food items – pushing up the price for consumers. We may start to see the effects of this coming through in the autumn.

AI investors feel the heat

This summer’s extreme weather may not have directly impacted investment markets. However, what it might have done is to remind investors of the challenges of climate change resilience and the need for energy security, including the transition to renewables and sustainable sources. We have seen a notable interest in this area in 2026, as investors look at the electricity demand needed to power AI data centres (both for those already built and any that are in the pipeline).

In recent years, the concerns were around the availability of AI chips and if there would be enough of them being made to provide the necessary computing power.

Now, a question being posed in 2026, is, will there be enough electricity to run them? This is something our Sustainable Investment Team has been monitoring for some time, including the link with utility companies (especially in the US).

There is no doubting that AI data centres will require vast amounts of energy to function. In recent weeks, it has been reported that big US tech companies (such as Microsoft, Alphabet and Oracle Corp) have committed around $1 trillion in future payments for data centres (under leases not yet started).

Alibaba, the Chinese multi-national tech firm, also announced in the month details of its substantial new investment plans for AI infrastructure. With such vast amounts being spent on this sector globally, investors have been questioning what returns will be generated from their investment. And whilst enthusiasm for AI certainly hasn’t waned with them, doubts have emerged about whether investment returns will outweigh the spend.

Fortunately, Nvidia (currently the world’s most valuable company) provided some reassurances to markets - in late August, it released results that evidenced demand remained strong.

Crude oil stays elevated but stable

Staying with energy, oil prices were less volatile in August than July’s roller-coaster ride, remaining relatively steady until later in the month. The ongoing shipping crisis in the Strait of Hormuz was largely unresolved - some vessels continued to avoid the area, whilst others braved the crossing. Tensions escalated later in the month around Larak Island (in the Strait), after the US alleged that Iran was deploying sea mines. Iran responded by targeting US bases in neighbouring Jordan.

Oil markets were quick to react to this news, as crude oil pushed above $90 a barrel on the 31 August (up from $86 earlier in the week), renewing investors’ concerns that the situation could re-ignite. While lasting peace still feels distant, we should still take comfort that 'all-out war' has, so far, been avoided.

Global economic focus

Investment markets were broadly positive in August. Global equities were supported by strong earnings, and the continuing AI theme. But there were tensions in markets.

Geopolitics and trade policy continued to influence sentiment, and the ongoing uncertainty around the Strait of Hormuz remained a key concern for commodity markets - the US government announced further sanctions on Iran during the month.

Trade relations between the US and Canada also deteriorated in August. Negotiations between the two failed, resulting in the US government imposing 50% tariffs on a range of Canadian goods and automotive products. Against this backdrop, policymakers worldwide continued to keep a watchful eye on inflation.

The US’s Federal Reserve kept its bank rates steady at the August meeting as headline inflation eased back to 3.4% in July (from 3.5% in June).

Fed Chair Kevin Warsh said at a recent Jackson Hole meeting in Kansas City that "…underlying inflation hasn’t meaningfully improved in recent months". And we know he will be watching the data closely.

So, the August inflation reading might be a deciding factor - the jury, therefore, is still out for a rate change at the next policy meeting in September.

In the month, UK Prime Minister, Andy Burnham kicked off a nationwide cost-of-living tour of Britain aimed at easing pressure on UK households. The Bank of England’s Monetary Policy Committee left the bank interest rate unchanged (at 3.75%) at its latest meeting in July. However, they are no doubt waiting to see what the new cabinet’s policies will be.

All eyes are now on the October autumn budget – the first of Mr Burham’s premiership.

The latest stats from the European Union suggested modest recovery in August.

Germany saw a gradual strengthening in its manufacturing, services, and construction sectors. Inflation, however, remained a concern, as prices rose for 'producer' and 'import' areas for the region’s biggest economy. Meanwhile, France (the second biggest) saw its quarter two economic growth stall, with its service sector remaining weak.

The European Central Bank meets again in early September to discuss interest rates - at its last meeting in July, it didn’t rule out future rate rises as inflation in the Eurozone remains persistent.

It would be unjust for us not to mention Asian markets in our round-up this month, and there were some notable economic winners: Japan, China and South Korea were amongst the countries who have seen an increased demand around a common theme of chips, computers and other AI-related products as factory activity expanded during August.

As stock markets continued to make further gains, bond markets struggled during the month as they experienced further significant volatility attributed to inflationary concerns, and the debate over higher for longer interest rates. Longer-dated government bond yields, for example, reached multi-decade highs during August.

As forward looking, contrarian investors, we continue to cast our net wider (both in the UK and overseas) to select investments for our funds which we feel will provide the best customer outcomes.

Alongside investing in the AI technology theme, we also see the benefit in diversification, which for us, includes any other areas where we see mispriced assets, which have the potential to strongly recover in the future.