Macro Snapshot – August 2025

Shifts in policy, trade drama, and what it all means for your money

August is usually a quieter month in markets, with many traders and fund managers on summer break. Not this year. Policy signals from central bankers and fresh trade tensions kept investors firmly on their toes.

The chart below provides a visual snapshot of what investment returns looked like for a selection of assets and regional interests for the month of August in sterling terms. 

Central banks: the balancing act

The Bank of England made a narrow cut, trimming interest rates to 4%. Over in the U.S., Federal Reserve Chair Jerome Powell used his Jackson Hole speech to hint at a possible September cut. Neither move was a surprise on its own, but taken together, they sharpened focus on the path ahead.

For UK investors, the backdrop was mixed: inflation rose to 3.8%, growth looking weak, and rising concern about the jobs market. The message? Rates may fall from here, but it’s unlikely to be a smooth, one-way street.

Trade and tariffs: ‘Trumponomics’ in the headlines

Trade policy grabbed plenty of attention too. Court rulings questioned the legality of certain tariffs, delays clouded measures on China, and new 50% tariffs were slapped on India. For investors, it meant more uncertainty, and a reminder of how politics and markets remain tightly linked.

One striking example was copper. When President Trump announced a 50% tariff on copper imports at the very end of July, the impact was immediate. Prices slumped in August, showing how quickly political moves can ripple through.

Currencies, gold, and the dollar story

All this policy noise weighed on the U.S. dollar, which fell just over 2% against sterling in August. That weaker dollar brought mixed results. It boosted returns for gold and some commodity-linked assets in dollar terms, but it cut into the value of unhedged U.S. investments for UK investors.

Gold is a good case study. In dollars, it rose around 5% in August. In sterling, though, the gain was just 0.6%. The difference came down to currency moves. That’s why some investors use hedged share classes of funds, to strip out the dollar impact when their goal is simply to protect against inflation or market stress in sterling terms.

Bonds and equities: different reactions

Government bonds had a choppy month. Hopes of rate cuts offered some support, but rising yields (the cost of borrowing) pulled prices down for many bond funds. This pressure isn’t just about economics, governments are wrestling with heavy debt loads, and political uncertainty in places like the U.S., UK, and France added further strain.

Equities, by contrast, found relief in the idea that lower rates may be on the way. Stocks tend to welcome cheaper borrowing costs, and that dynamic gave global markets some lift.

What stands out for investors

When you look across August, three themes mattered most:

Policy drives prices - Interest rate moves or even hints of them ripple through currencies, bonds, equities, and commodities. While no one can predict every step, knowing how these shifts affect different asset classes can help you decide whether to hold, trim, or add to positions.

Currencies matter more than you think - If you invest internationally, exchange rates can explain why returns feel stronger or weaker than expected. Sometimes they work in your favour, sometimes against you. Over time, they can make a meaningful difference.

Diversification cushions shocks - Sticking only to home-market investments may feel safe, but it comes with risks. August highlighted the benefits of spreading exposure globally: Chinese equities, for example, stood out with strong gains, balancing weaker areas elsewhere.

A closer look: copper as a ‘macro barometer’

Copper has long been nicknamed ‘Dr. Copper’ because of its role in diagnosing the health of the global economy. It’s widely used in construction, power, electric vehicles, and renewable energy. While not a typical standalone portfolio investment, its price swings often signal changes in demand across industries. That said, copper isn’t a perfect gauge. Short-term moves can be distorted by supply disruptions or political decisions, as August made clear.

In summary

Markets in August served up a mix of policy pivots, trade shocks, and currency moves. For everyday investors, the lesson is not to chase every headline but to understand how these big forces interact with your portfolio. 

Disclaimer: This article is for information and educational purposes only. It expresses my personal views and frameworks for thinking about markets and investing. It does not constitute investment advice or a financial promotion, nor is it a personal recommendation to buy or sell any investment. Everyone’s situation is different, so if you are unsure about a decision, it’s important to seek guidance from a qualified financial professional.

The views, forecasts, and figures included reflect analysis at the time of writing, unless otherwise stated. sources used are believed to be reliable, but markets and circumstances can change quickly, which means our views may also evolve over time.