Investment Update – August 2025

What happened in markets?

August was a relatively calm month with most equity regions posting modest but positive returns, pushing global equities to new all-time highs once again. Japanese equities were the outlier in this respect, returning almost 5% over the month having underperformed the other major developed equity markets since the start of the year. Japan offers relatively attractive starting valuations and positive earnings growth, even though the central bank appears to have more work to do to tame
inflation.

Despite the relatively calm nature of equity markets, the release of July’s US jobs report surprised markets with jobs growth missing expectations, but perhaps even more surprising was the downward revisions to the June and May data. Treasury yields fell sharply as a weaker labour market increased the odds of a rate cut by the US Federal Reserve at its September meeting.

Attention was also focussed on long-dated government bonds, where borrowing costs in the UK, France and Japan continued to rise, adding to pressures on the UK Chancellor ahead of her Autumn budget. Meanwhile, the French government is on the verge of collapse as it seeks to tackle a mounting budget deficit.

Source: Morningstar Direct, total return in GBP or hedged to GBP for bonds, for the calendar month

What did we do in the funds?

We allowed equity weights to drift higher over the month as continued corporate earnings growth and the prospect of Fed rate cuts provide a nice cocktail for equity markets. Within Esprit Careful Growth the increase in equity exposure was funded by a reduction to the target cash weighting, whilst government bonds were reduced in Esprit Tactical Balanced and Esprit Tactical Growth. A reduction to gold in Esprit Tactical Alpha Plus was preferred given lower relative cash and government bond weightings.

These changes reflect our desire to be underweight government bonds despite attractive yields and the prospect of further rate cuts.

Indeed, despite developed market central banks being engaged in a rate cutting cycle, long-dated government bond yields have continued rising. There are a few factors behind this, including heightened fiscal deficit concerns where the UK and France appear particularly vulnerable.

What is the Outlook?

The Fed are expected to reduce interest rates in September following a weaker-than-expected July jobs report, and the release of August’s report will be closely watched. With downside risks to growth starting to emerge, the justification for further rate cuts is growing, something which will placate the Trump administration and should support equity valuations, provided economic growth remains positive.

In some areas of the world fiscal policy is at odds with monetary policy. The UK is a good example, where increases in the minimum wage and employer National Insurance contributions created cost pressures for businesses, which have been passed onto the consumer via higher prices. This leaves the Bank of England unable to cut rates more aggressively, despite a weakening growth outlook.

Download our full Investment Update to access more details

Do you want to learn more about how we invest?

Learn more about our investment process, our funds and the Investment Team here.

If you have further questions about investing with Shackleton or want to get in touch with our team, please contact us. We are always happy to help.

---

Important information:

This document is issued by Shackleton, which is a trading style of Shackleton Advisers Limited. Shackleton makes no warranties or representations regarding the accuracy or completeness of the information contained herein.  We have prepared the following document based on our view of the current market. Nothing in this document shall be deemed to constitute financial or investment advice in any way. We recommend you speak to your adviser before making any decisions.  This document shall not constitute an invitation or inducement to any person to engage in investment activity. Past performance is not a guide to future returns and the value of capital invested and any income generated from may fluctuate in value.