August 2026 delivered a modestly constructive backdrop for risk assets with notable regional divergences between equities and bonds. Select cyclicals and energy hubs outperformed, while several EM rate‑sensitive and FX‑fragile markets lagged.
Our stance tilts toward equity‑led stories with supportive FX and clear sovereign spread anchors, while we fade markets where weak equity tapes, soft FX and long‑duration beta are misaligned with fundamentals.
ML United States Equity Index returned +0.64% in August 2026, while ML United States Bond Index returned +0.01% in August 2026, underscoring an essentially flat cross‑asset profile. Equities only marginally beat bonds, with leadership concentrated in select growth and tech‑adjacent names such as PayPal Holdings (+26.77%), Cognizant Technology Solutions (+25.56%) and Microsoft (+25.41%). Losers like Roblox (-35.34%), Alnylam Pharmaceuticals (-31.49%) and Mastec (-27.21%) highlight continued stock‑specific risk in unprofitable growth and capex‑heavy stories. On the credit side, idiosyncratic upside in ION Platform Finance 2032 (+13.06%), Mercer International 2029 (+11.38%) and Gray Media 2031 (+8.40%) contrasts with sharp declines in Brightline East 2030 (-26.30%) and Hertz 2029 lines, arguing for selective credit risk rather than broad beta.
ML United Kingdom Equity Index returned +5.11% in August 2026, materially outpacing ML United Kingdom Bond Index, which returned +0.28% in August 2026. GBP strength versus USD (+1.35%) further enhanced the equity outperformance for dollar‑based investors. Equity gains were driven by a mix of defensives and cyclicals, with Vodafone (+21.31%), The Sage Group (+20.35%) and BP (+18.43%) leading, while Rentokil (-19.76%), AstraZeneca (-18.50%) and Centrica (-8.02%) lagged. In credit, high‑beta corporates such as Victoria 2029 (+16.03%), Thames Water Utilities Finance 2029 (+11.46%) and Mobico 2031 (+7.16%) rallied, but this was offset by significant weakness in Virgin Media complex bonds, making net bond performance modest and reinforcing a preference for UK equity over duration at current levels.
| Country | Equity Index Return | Bond Index Return | FX vs USD | Stance |
|---|---|---|---|---|
| Colombia | +9.68% | +1.56% | COP +3.21% | OW Equity & Sov Debt |
| Poland | +9.45% | -1.13% | PLN +0.53% | OW Equity vs Bonds |
| Hong Kong | +9.00% | -0.33% | HKD +0.00% | OW Equity |
| Czech Republic | +8.60% | -0.18% | CZK +0.86% | OW Equity, Neutral Bonds |
| Norway | +7.46% | +5.33% | NOK +2.83% | OW Cross‑Asset |
ML Colombia Equity Index returned +9.68% in August 2026, while ML Colombia Bond Index returned +1.56% in August 2026, with COP appreciation of 3.21% amplifying returns in USD terms. Equity performance is narrow but strong: financials via Grupo Cibest pref (+16.26%) and common (+12.41%) led, with Interconexion Electrica (+5.03%) providing regulated utility support. On the bond side, Colombia (Republic of) 2031 surged +56.36%, while 2028 and 2027 issues delivered mid‑single‑digit gains, outweighing pressure in the longer 2054 and 2049 lines. The combination of equity rerating, front‑end sovereign strength and supportive FX warrants an overweight across equities and selected sovereign bonds, with caution on ultra‑long duration.
ML Poland Equity Index returned +9.45% in August 2026, significantly outperforming ML Poland Bond Index, which returned -1.13% in August 2026; modest PLN appreciation (+0.53%) marginally enhanced the equity edge. Equities were buoyed by domestic growth proxies such as Dino Polska (+18.89%), LPP (+17.70%) and Asseco Poland (+15.36%), while losers like mBank (-1.66%) and KGHM (-0.92%) were contained. On the bond side, short‑dated Poland (Republic of) 2027 and 2028 securities inched up, but were more than offset by declines in long‑dated Poland 2054 (-3.88%), Bank Gospodarstwa Krajowego 2054 (-3.47%) and Poland 2053 (-3.43%). We prefer Poland via equities and short‑ to mid‑tenor sovereigns, underweighting long duration.
ML Hong Kong Equity Index returned +9.00% in August 2026, while ML Hong Kong Bond Index returned -0.33% in August 2026, with a flat HKD leaving local performance unchanged in USD terms. Equity gains were broad across domestic cyclicals and financials, led by Wharf Real Estate Investment (+20.64%), BOC Hong Kong Holdings (+19.82%) and Swire Pacific A (+18.84%), while defensives such as WH Group (+0.94%) and Jardine Matheson (+2.50%) merely lagged the rally. In contrast, Hong Kong credit saw curve‑specific weakness, with CK Hutchison International 2049 (-3.66%) and 2050 (-3.35%) and AIA Group 2054 (-3.02%) weighing on the index despite modest strength in perpetuals like Li & Fung 2079 (+4.07%). We hold a clear overweight in Hong Kong equities, maintaining a cautious stance on long‑dated corporate bonds.
ML Czech Republic Equity Index returned +8.60% in August 2026, notably ahead of ML Czech Republic Bond Index, which returned -0.18% in August 2026; CZK appreciation of 0.86% further supports the equity story. Equity leadership is concentrated but coherent: CEZ (+11.27%) provided utility and energy exposure, while Komercni Banka (+8.21%) and Moneta Money Bank (+3.64%) underscored stable financials, with no material downside movers in the small universe. In bonds, short‑dated Czech Republic 2028 and 2029 issues delivered ~1% gains, but were offset by weakness in Czech Republic 2040 (-1.60%) and 2036 lines. We favor Czech equities for their clean, narrow leadership and view bonds as neutral, preferring the mid‑curve over the long end.
ML Norway Equity Index returned +7.46% in August 2026, while ML Norway Bond Index returned +5.33% in August 2026, with NOK up 2.83% versus USD, making Norway one of the few clear cross‑asset winners. Equities were driven by energy and resource exposures, with Equinor (+23.33%) and Var Energi (+20.05%) leading, complemented by consumer staple SalMar (+18.16%); downside was limited to marginal pullbacks in Kongsberg Gruppen (-1.06%) and Telenor (-0.52%). On the sovereign side, Norway Kingdom of Government bonds in the 2028‑2030 sector rallied between +6.71% and +6.93%, with even the 2039 bond advancing +5.25%; only subordinated corporate paper like Var Energi hybrids posted low‑single‑digit gains. This synchronized equity, bond and FX strength supports an overweight across both Norwegian equities and high‑quality sovereign bonds.
| Country | Equity Index Return | Bond Index Return | FX vs USD | Stance |
|---|---|---|---|---|
| Egypt | -5.27% | -0.69% | EGP -2.61% | UW Cross‑Asset |
| Turkey | -3.71% | -0.98% | TRY -1.45% | UW Cross‑Asset |
| Taiwan | -2.93% | -0.87% | TWD -0.89% | UW Equity, Selective IG |
| Qatar | -1.65% | -0.33% | QAR +0.00% | UW Equity vs Credit |
| United Arab Emirates | -1.56% | -0.90% | AED +0.00% | UW High‑Beta Credit |
ML Egypt Equity Index returned -5.27% in August 2026, while ML Egypt Bond Index returned -0.69% in August 2026, with a 2.61% EGP depreciation exacerbating both equity and bond losses for USD investors. Equity weakness was broad, led by Eastern Co. (-7.67%), Talaat Moustafa Group (-5.52%) and Commercial International Bank (-2.61%), signaling pressure across consumer, real estate and financials. In bonds, short‑dated Egypt (Arab Republic of) 2027‑2029 issues posted small gains (~+0.5%), but longer‑dated 2047 (-2.09%), 2050 (-1.74%) and 2048 (-1.50%) underperformed, leaving the overall index negative. We remain underweight Egypt across assets, preferring only very short sovereign exposure for liquidity.
ML Turkey Equity Index returned -3.71% in August 2026, and ML Turkey Bond Index returned -0.98% in August 2026; TRY weakened by 1.45% versus USD, amplifying downside. Equities saw sharp idiosyncratic drawdowns in industrial and financial champions, including Aselsan Elektronik (-14.82%), Turkiye Is Bankasi C (-14.17%) and Akbank (-12.75%), partially offset by resilient names such as Turkiye Petrol Rafinerileri (+9.28%) and Koc Holding (+0.99%). In bonds, modest gains in Anadolu Efes 2028 (+0.86%), Turkey (Republic of) 2027 (+0.73%) and We Soda 2028 (+0.61%) were overwhelmed by a collapse in Vestel Elektronik 2029 (-47.43%) and broad weakness in 2033 sovereign lines. The mix of volatile equity leadership, stressed credit and weak FX supports a clear underweight.
ML Taiwan Equity Index returned -2.93% in August 2026, while ML Taiwan Bond Index returned -0.87% in August 2026, with TWD depreciation of 0.89% marginally worsening returns for USD‑based investors. Equity performance was bifurcated: winners such as Asustek Computer (+18.39%), Wistron (+17.57%) and Wiwynn (+16.04%) show strength in select tech hardware, but severe losses in Yageo (-40.09%), Innolux (-30.13%) and GlobalWafers (-29.43%) underscore cyclicality and positioning risk across the tech complex. On the bond side, investment‑grade issuers like TSMC Global 2027 (+0.42%), 2028 (+0.36%) and Foxconn Far East 2030 (+0.22%) offered only small gains, while long‑dated TSMC Arizona lines (2052, 2051, 2041) fell between -2.41% and -3.98%. We stay underweight Taiwan equities and focus any exposure on shorter‑dated high‑quality corporates.
ML Qatar Equity Index returned -1.65% in August 2026, while ML Qatar Bond Index returned -0.33% in August 2026, with a flat QAR leaving local moves unchanged for USD investors. Equity performance was modestly negative, with financials like Dukhan Bank (-3.23%) and Commercial Bank of Qatar (+1.79%), as well as materials and utilities names such as Mesaieed Petrochemical (-3.12%) and Nebras Energy (-2.77%), signaling lack of strong leadership. In bonds, QNB Finance 2029 (+0.33%) and 2030 (+0.22%) and Qtel International 2028 (+0.11%) eked out small gains, but were offset by declines in Qtel International 2043 (-2.55%), Ooredoo International 2034 (-1.03%) and CBQ Finance 2030 (-0.91%). We remain underweight Qatari equities versus a more neutral stance on shorter‑dated agency and financial bonds.
ML United Arab Emirates Equity Index returned -1.56% in August 2026, and ML United Arab Emirates Bond Index returned -0.90% in August 2026, with a stable AED keeping USD returns aligned with local moves. Equities were dragged by industrial and real estate cyclicals such as Air Arabia (-9.21%), Salik (-8.75%) and Aldar Properties (-8.11%), while First Abu Dhabi Bank (+8.66%) and ADNOC‑related names provided partial offset. In credit, high‑quality issuers like First Abu Dhabi Bank 2031 (+0.68%) and 2030 (+0.57%), alongside National Central Cooling 2027 (+0.53%), outperformed, but were swamped by heavy selling in Binghatti Sukuk 2 SPV 2029‑2031 (down between -7.63% and -10.25%). We underweight high‑beta UAE credit and maintain only selective exposure to core financial and utility issuers.
| Bucket | Key Countries | Bias | Preferred Sleeve |
|---|---|---|---|
| Core Developed | United States, United Kingdom | Neutral US, Mild OW UK | UK equity over UK duration |
| Pro‑Risk Overweights | Colombia, Poland, Hong Kong, Czech Republic | OW | Equity; selective short‑/mid‑tenor sovereigns |
| Cross‑Asset Winner | Norway | OW | Equity plus sovereign bonds (2028‑2039) |
| Defensive Underweights | Egypt, Turkey | UW | Minimal equity; only very short sovereign exposure |
| Selective Tech Credit | Taiwan | UW Equity | Short‑dated IG corporates; avoid long duration |
| Gulf Credit Focus | Qatar, United Arab Emirates | UW Equity | Selective high‑quality financial/agency bonds |