Market Commentary

Several major share markets hit record or near-record highs in August, powered by strong company earnings and renewed faith in AI. Computer chip maker NVIDIA saw its stock price jump almost 10% in August, with quarterly revenue up 106% from the same quarter last year - though strong earnings weren’t confined to just tech companies alone.

In the Middle East, Iran–Oman talks about creating a "safe route" through the Strait of Hormuz offered a glimmer of hope that diplomatic efforts to keep the oil flowing were bearing fruit. This helped ease oil prices back from July's highs, despite Iran signalling it may take a more “offensive” stance - pointing to potentially rising tensions with the US.

Meanwhile inflation concerns, Middle Eastern tensions, and rising government debt are pushing bond yields higher, with investors demanding better yields to lend money for the long term — pushing bond prices lower in turn.
 

Rising costs

Inflation remains a key word on everyone's lips. The Reserve Bank of Australia kept its cash rate unchanged at 4.35% in August, as annual inflation came in at 3.5% (down from 3.8% in June) for the 12 months to July, but remains outside its 2-3% target.

Gas prices were a key driver behind UK inflation ticking up to 2.9% (from 2.6%) in the year to July, moving further from the Bank of England's 2% target and suggesting future cuts to its current 3.75% bank rate may be less likely.

The US saw recently sworn in Federal Reserve chair Kevin Warsh take the stage in August, delivering his first speech at Jackson Hole, Wyoming. While the speech was vaguer than many had hoped for, it was largely read as "hawkish," despite Warsh not outwardly signalling support for rate hikes. Annual inflation there is at 3.4%.

Back home, inflation is still running hot at 4.1% for the year to June, well above the Reserve Bank of New Zealand's 1–3% target band, raising market expectations of a rate rise at its September meeting (Note: the Official Cash Rate rose in September to 2.75%).

Trade wars rumble on

The US and Canada went toe-to-toe in August, with Canadian Prime Minister Mark Carney retaliating against US tariffs of 50% on Canadian dairy, alcoholic drinks, vehicles and other goods. Canada responded by imposing tariffs on more than 700 US products, which will take effect in September, while the US tariffs on Canada are already in place.

In quirkier news, Elon Musk's rocket company SpaceX announced it plans to build a $100 billion self-sustaining spaceport on Pecan Island, Louisiana - dubbed "Starbase Louisiana" and designed to become the busiest launch site on Earth. SpaceX shares started trading on the New York Nasdaq in June, in what was the world's biggest ever stock market debut.

Markets riding high

The UK's FTSE 100 came within a stone’s throw of a record high in August before pulling back, showing strong underlying momentum.

Compelling US performance across the S&P 500, Nasdaq and Dow reflected broad-based momentum, rather than a narrow rally concentrated in a handful of mega-cap tech stocks.

Australia's ASX 200 came close to a record too, buoyed by strength in sectors including tech, healthcare and financials, pointing to broad-based confidence there as well.

Closer to home, the NZX 50 also rang the record bell, briefly pushing through 14,000 before pulling back again, as investors banked profits. It still ended the month up overall. Fisher & Paykel Healthcare (the biggest and heaviest weighting within the NZX 50) continues to be strong, thanks to stronger hospital demand and US tariff refunds which pushed up its share price by 7.9% in August.                                                                                                                       

Although a great deal of press is focused on the high-water consumption of data centres in the US, it is still well behind the likes of nut growers and golf courses.

Chart of the month: Annual US water consumption (billion gallons per year) California almonds, California pistachios, golf courses, residential pools, and data centres (closed-loop cooling).

Source: Crawford Lands, LLC