According to Deutsche Bank's analysis, the S&P 500 returned 2.7% in August, with technology shares providing significant lift. The Magnificent Seven gained 4.4%, maintaining leadership among the largest US companies despite broader economic data remaining supportive. As reported by Deutsche Bank, the Eurozone composite flash PMI reached a nine-month high in August, while the equivalent US measure rose to its strongest level in four years. This firm macro backdrop, combined with a strong earnings season, helped risk assets absorb geopolitical and policy uncertainty throughout the month. However, recent market developments show some volatility returning, with Wall Street's S&P 500 falling 0.7% and Nasdaq Composite dropping 1% overnight due to rising government bond yields. The Philadelphia Semiconductor Index rose by only 2.0% after four consecutive months of moves exceeding 10% in either direction, while Brent crude oil gained just 0.4%, its smallest monthly change since 2024.
As reported by Deutsche Bank, the more consequential action occurred in the bond market during August. Long-dated sovereign yields climbed toward levels not seen for many years, with the 30-year US Treasury yield touching 5.31% on August 18, its highest level since 2007. Germany's 30-year yield reached 3.81% at month-end, its highest since 2011. The US yield curve flattened during August, with 2-year Treasury yields rising by 5 basis points and jumping 11 basis points following Federal Reserve Chair Kevin Warsh's Jackson Hole address. However, the 30-year yield finished the month 3 basis points lower despite touching multiyear highs earlier in August. Recent data from the Institute for Supply Management shows U.S. Manufacturing activity moderated during August due to a slowdown in new orders, though it still remained in an expansionary zone. The Federal Reserve will likely raise interest rates in its next meeting scheduled for September 16, with Fed funds futures having an implied probability of 67% that benchmark borrowing costs will increase by 25 basis points, up from 39.6% a week earlier according to CME Group's FedWatch tool.
According to Deutsche Bank's analysis, precious metals were among the clearest beneficiaries of market volatility. Gold gained 9.7% in August, while silver advanced 15.6% as investors balanced higher short-term rate expectations against concerns about debt, currency credibility and intervention in sovereign bond markets. Agricultural commodities also experienced significant strength, with corn futures rising 16.8% in their strongest monthly performance in five years, wheat gaining 18.3% in its largest increase in four years, and sugar climbing 21.5%, its best month since 2018. This strength was linked partly to the continued closure of the Strait of Hormuz and the current El Niño weather pattern. However, recent market movements show some cooling, with Gold falling 0.6% to $4,304.64 per ounce and Bitcoin dropping 0.1% to $77,340.50, while Ether declined 0.5% to $2,407.01.
As reported by Deutsche Bank, the relative calm in US long-dated yields did not extend across Europe. French 10-year yields rose by 18 basis points, Italian yields increased by 13 basis points, and German yields climbed by 12 basis points, compared with increases of only 2 basis points in the United States and 1 basis point in the United Kingdom. Japanese government bonds also weakened as investors increased expectations for further Bank of Japan tightening, with Japan's 10-year yield rising by 15 basis points and the 2-year yield climbing by 23 basis points. The U.S. Dollar Index rose 0.1% to 99.79, its highest level since August 17, reflecting the greenback's strength against a basket of six currencies. The U.S. Dollar Index rose 0.1% to 99.79, this was its highest level since August 17, reflecting the greenback's strength against a basket of six currencies.
According to Deutsche Bank's analysis, the Philadelphia Semiconductor Index rose by only 2.0% after four consecutive months of moves exceeding 10% in either direction, while Brent crude oil gained just 0.4%, its smallest monthly change since 2024. This modest return concealed the continuing importance of the Strait of Hormuz disruption for inflation, refined products and the broader commodity complex. The result was an August that appeared straightforward through the equity lens but looked considerably more unsettled when viewed across rates and commodities, with growth and earnings supporting stocks while sovereign bonds wrestled with inflation, fiscal pressure and the prospect of further monetary tightening. Recent market developments show the Federal Reserve's implied probability of 67% that benchmark borrowing costs will increase by 25 basis points at the upcoming September 16 meeting, up from 39.6% a week earlier according to CME Group's FedWatch tool.
