August 2025 Monthly Report – Equity Market Analysis & Investment Strategy

Markets Analyses – August2025

In August 2025, global financial markets display cautious optimism. In the United States, the S&P500 advanced by +1.9 %, a notable gain supported by expectations of interest rate cuts, though investors remain alert to macroeconomic risks. The environment, however, remains uncertain, shaped by geopolitical tensions, inflation data, and signs of slowing economic growth in certain regions. Markets are closely monitoring the impact of trade disputes and the volatility of oil prices.

Stocks

In August 2025, despite ongoing trade frictions, U.S. equity markets returned to record highs: the S&P 500 posted a fourth consecutive monthly gain, rising by approximately 1.9% and closing at 6,460.26 on August 29.

However, sectoral pressures emerged toward the end of the month, as technology and semiconductor stocks (including Dell, Nvidia, Broadcom, Oracle, and Marvell) experienced notable pullbacks. This contributed to a late-month decline of −0.6% for the S&P 500 and −1.2% for the Nasdaq Composite.

In Europe, the CAC 40 began August on an upward trend, rising from around 7,546 on August 1 to a peak of roughly 7,970 on August 19, before easing toward the end of the month and closing at approximately 7,703 on August 29, marking a total decline of about −0.8% for the period. This pattern reflects mounting political instability: Bayrou appears increasingly isolated, Macron weakened, and the risk of snap elections or a prolonged political crisis looms over the national economic outlook. On the political front, Bayrou’s confidence vote aimed at passing a €44 billion austerity package (including the removal of public holidays) triggered strong opposition from both the right and the left. The CAC 40 reacted immediately, falling −1.5% on the announcement, with banks tumbling more than 6%.

• Tariffs: This month, Donald Trump’s tariff policy reached unprecedented intensity, with an effective average rate of around 18.6% — the highest level since 1933. Several countries, including Brazil, India, the EU, Mexico, Canada, and multiple nations across Asia and Africa, were targeted by tariffs ranging from 20% to 50%, depending on the case. In response, India redirected its exporters to alternative markets as of August 27, after the imposition of a 50% duty on its exports, affecting textiles, gems, agricultural products, and equipment. On the legal front, a federal appeals court ruled it illegal to impose such tariffs without prior Congressional approval, while allowing them to remain in force pending a likely Supreme Court decision. These tariff revenues nonetheless generated $31 billion in August alone, representing more than 8% of monthly Treasury receipts. This creates an ambiguous situation, offering visible short-term fiscal support but fueling growing uncertainty around the legitimacy and sustainability of the policy.

• Gepolitic: In the field of nuclear security, tensions with Russia escalated sharply: the withdrawal from the INF Treaty, Russia’s military maneuvers with nuclear submarines, and its heightened nuclear rhetoric have all deepened a climate of direct confrontation. Overall, the geopolitical environment in August reflected an intensification of trade, institutional, and strategic conflicts, reshaping the balance of global power.

FED The Federal Reserve left its policy rate unchanged, maintaining the target range at 4.25%–4.50%, in line with the cautious stance adopted at the July meeting. At the annual Jackson Hole Symposium (August 22), Jerome Powell stated clearly that, despite persistent inflation — with headline PCE steady at 2.6% and core PCE at 2.9% — labor market deterioration could justify a rate cut as early as September. Powell’s dovish tone lifted equities, pushed bond yields lower, and weakened the dollar, with markets pricing in over a 90% probability of a 25-basis-point cut at the September meeting.

Meanwhile, two FOMC members, Michelle Bowman and Christopher Waller, publicly dissented in favor of an immediate rate cut, citing the slowdown in the labor market while downplaying inflation risks tied to tariffs. August therefore closed with a more accommodative policy shift, marking a notable inflection in the Fed’s communication while reaffirming its independence from external political pressures.

Bonds

The U.S. bond market remained broadly stable, with high-quality debt continuing to attract investors. Despite a slight uptick in yields, the investment-grade segment benefited from tighter spreads, approaching the historically low levels seen in the late 1990s. Average yields on “BBB”-rated bonds held below 5%, while high-yield debt continued to offer attractive returns, maintaining only a moderate spread over Treasuries.

Meanwhile, the 10-year Treasury yield hovered between 4.22% and 4.24%, edging lower toward month-end, reflecting renewed market confidence in anticipation of a potential Fed rate cut and sustained inflation control. The tightening of spreads signals robust risk appetite, though underlying geopolitical and inflationary pressures continue to foster a cautious environment.

Commodities

• Oil : WTI crude remained within a narrow range, trading around $64–66, supported by expectations of stable demand despite rising output, particularly from OPEC+. The anticipated increase in August production helped cap upward momentum, bringing projected annual averages back to more moderate levels.

• Gold: Gold (+34% year-to-date) approached $3,450, posting another 5% gain in August. Prices were buoyed by expectations of Fed rate cuts, continued central bank purchases, and a weaker dollar, further consolidating gold’s role as a safe-haven asset...
  

Summarize :

August 2025 confirmed the rebound in global markets: the S&P 500 and Nasdaq reached new record highs, driven by easing trade tensions and the strength of technology stocks. In Europe, the CAC 40 remained cautious, awaiting tangible progress in trade negotiations. Bonds and oil benefited from the prevailing optimism, while gold held onto its gains. Looking ahead, investors are expected to closely monitor central bank decisions in September and the trajectory of trade talks, while maintaining selective exposure to risk assets, particularly in technology and high-quality credit.

Investment Strategy : The landscape has shifted, and both hedge funds and asset managers will need to adjust as markets head into the fall — and so will we.

• Israel : We maintain an underweight position in Israeli equities (following record highs), given the risk of a potential “Round 2” with Iran in October 2025. Conversely, we are increasing exposure to local bonds, taking advantage of attractive new issuances that offer compelling yields with a contained risk profile.

• USA : Numerous articles have been warning for the past two months about bubble risks, with valuations and historical ratios at extreme levels. Yet U.S. markets continue to advance like a steamroller, already delivering a solid +10% year-to-date performance as of August 29, 2025, after having dropped nearly 15% in early April. Caution remains warranted: some profit-taking is likely, but it could also provide an opportunity to re-enter. In the meantime, the strategy is to hold positions and remain patient.

• OIL WTI : An attractive entry point stands around $60, with a buy recommendation. Any potential military escalation between Israel and Iran could trigger a swift and significant price rebound, creating a tactical short-term window of opportunity.