Review – An unexpectedly quiet August with price surges in precious metals and Bitcoin!
Following the market turmoil towards the end of July, which coincided with the collapse of several high-profile hedge funds, August turned out to be unexpectedly calm. All relevant index families (MSCI, FTSE Russell, etc.) saw gains based on their global strategies, which is why returns for global strategies have once again reached double digits, significantly outperforming long-term returns of 6–8% p.a.
Shares in semiconductor manufacturers, which had been battered in July, stabilised in August and provided support for the many indices in which they are heavily weighted. These include the country indices for South Korea and Taiwan, as well as the MSCI Emerging Markets Index, the S&P 500 and the Nasdaq 100 Index.
The recovery in shares in private equity and healthcare companies continued. The same applies to producers of commodities and metals, which also had a positive impact on the stock markets of frontier markets (e.g. Redwheel Emerging Frontier Portfolio).
Shares in gold and precious metal producers experienced a veritable surge in price after performing extremely poorly in previous months, with many community members already wondering whether they should divest from these highly volatile positions.
This once again highlights that it is advisable to buy securities when they are cheap, even if it doesn’t feel right. When everyone is looking to buy, valuations are usually no longer attractive.
For this reason, I cannot emphasise enough that it is worthwhile for long-term investors to take a look at our valuation traffic light system (pages 7–10). It provides guidance and allows you to set emotions aside.
Only Indian and Latin American stocks, as well as REITs, had a weak August.
Anyone looking at equity factors will note that shares reflecting the so-called momentum factor continued to face negative performance in August after a disappointing July. All other factors – such as value, quality, income and size – had a good to very good month. The same applies to the multi-factor strategy, which reflects value, quality, size and momentum in an equal weighting.
It is worth emphasising once again the extent to which the value factor is currently out-performing all other factors, especially also in a five-year comparison. This is remarkable and shows that investors should have the confidence to consider tried-and-tested strategies, even if they lag behind over longer periods. Value was considered dead, but has returned with a vengeance! We have therefore deliberately included a global value strategy for small-caps in our advisory universe (Avantis Global Small Cap Value – R79-F) to give the community the opportunity to fully capture the value renaissance in their portfolios.
Our active managers all had a good August and were able to either outperform their benchmarks or come very close to them. The same applies to our active managers who are significantly invested in semiconductor stocks (e.g. CT Global Technology and CT Global Focus), who were able to recoup the minor losses incurred in July.
Focus Global Bond Markets
Following Kevin Warsh’s unfortunate press conference in July, global government bond markets performed a bit better in August, but are still showing losses or flat performance for the year. Yields on 10-year government bonds in almost all major economies are now back at levels last seen around 2007/2008.
It is currently hard to believe that, just a few years ago, there were still market participants who claimed that long-term interest rates would remain permanently at around 0 to 1% p.a.
The so-called term premiums for long-term government bonds have risen significantly, and it is difficult to assess when this trend will come to an end. Anyone looking solely at inflation expectations will be keen to buy at current levels. However, anyone mindful of the United States’ solvency will certainly expect even higher premiums. We truly find ourselves in a vastly changed world, in which the solvency of many industrialised nations is being called into question. This is also evident from the fact that, over the last five years, US dollar-denominated government bonds from developing countries have performed considerably better than those from industrialised nations. The return differentials between our G3 component (Vanguard - Emerging Markets Bond Fund) and the standard B1 component (Vanguard Global Bond Index) are very clear, at +3.95% p.a. compared with –0.20% p.a. on a five-year average.
I recall writing years ago that hard-currency bonds from emerging markets are actually safer than the government bonds of many developed countries, because – with few exceptions – these countries’ levels of debt are considerably lower. Clearly, time has caught up with us and we are now faced with new realities. Bond buyers are, ultimately, lenders and expect to receive not only interest but also full repayment of their money, which is no longer guaranteed if you follow the developments in the United States!
This also highlights that buying simple ETFs or index funds to access the bond market may well be a mistake. Systematically and actively managed bond portfolios often deliver better results, particularly when they can be acquired at wholesale prices.
Despite the underwhelming performance of bonds in 2026 compared to global equities, it is important to emphasise that current yields are significantly above the expected medium-term inflation rate. Bond holders should therefore hold on to their positions, as they are needed within the portfolio context to complement stocks and commodities.
Nevertheless, we would steer clear of long-dated government bonds and instead opt for fixed income ideas with short to medium-term durations. Emerging markets and High Yield bonds are also worth considering, as they are less impacted by the discussion on the risk of developed market government bonds. They’ve also had a decent year so far and offer good value if compared to expected inflation rates.
Focus Commodity Markets & Bitcoin
In my review of July, I had pointed out that community members who might have bought their gold and copper mining shares too early should not give up hope and should instead consider buying more given the low valuations. However, I had not expected such a strong rally in gold and gold mining shares to follow as early as August.
Both gold and Bitcoin benefited significantly from the renewed uncertainty following Kevin Warsh’s lacklustre performance, as well as the ill-advised attempts by the US Treasury Secretary, Bessent, to stabilise the Japanese yen and long-term US government bonds.
Scott Bessent is now regarded as the Treasury Secretary who has made the most strenuous attempts to intervene in financial markets. Anyone who looks back at history will realise that such actions are generally not crowned with success.
Oil and gas prices continued to benefit in August from the resurgent crisis in Iran, for which there is currently no end in sight. The same applies to the Bloomberg Commodity Index (Bloomberg Commodity Index Total Return BCOMTR:Index), which managed to reach new highs.
Focus Property & Private Markets
REITs had a weak August, having enjoyed an unexpectedly good year despite rising long-term interest rates. Whilst they are still up for the year, investor appetite in this sector appears to have waned somewhat. Current valuations are not excessive, and property is likely to remain a safer long-term investment than US government bonds.
Following stabilisation in recent months, shares in private equity and private credit firms had a very good August and were able to significantly reduce their losses since the start of the year. The evergreen funds of the major PE firms have had a solid year so far, although I would describe the results as rather unremarkable compared with liquid markets. Our community has no major exposure here, which we are pleased about.
Focus Currencies
After the US dollar weakened slightly amid the recovery in the price of gold, it has now stabilised and is trading sideways. The prospect of rising Fed Fund rates appears to help after the US dollar had lost some value over the course of the month.
The US government tends to favour a weaker dollar, and the currency appears overvalued given America’s high level of debt and on the basis of its purchasing power parity.
Some diversification into more stable currencies such as CHF, SGD, AUD and NOK may be advisable. If community members are interested in foreign-currency financing, we currently favour CHF, SGD and HKD over the Japanese yen.
Our Investment Styles
We generally advocate three investment strategies or philosophies, which we can confidently assume are highly likely to lead to success in the long term.
1) Traditional index investing (Jack Bogle, the founder of Vanguard)
This strategy works very well and there is no reason to question it. However, the strategy also means that many indices in the MSCI and FTSE Russell families are currently heavily dominated by US equities. It is therefore important to assess the extent to which one’s own portfolio might also be – and should be – overweight in the US.
When it comes to bond indices, the fact remains that traditional indices are inevitably more heavily invested in bonds from higher-debt issuers than in those from less indebted companies. For this reason, investors keen on ETFs should take the trouble to compare bond indices with systematically designed indices (e.g. Dimensional) or high-quality bond portfolios (e.g. Pimco Income).
2) Factor-based or scientific investing (Eugene Fama/Kenneth French)
Since the start of the year, the value and momentum factors in particular have achieved strong outperformance. Shares in small companies (the size factor) have also performed very well so far this year, particularly in Japan and the US. The quality factor has improved significantly following a poor previous year and is now only slightly behind the broader market since the start of the year.
As far as systematic investing in bonds is concerned, it might be more accurate to refer to this as systematic investing rather than factor investing. Generally, fewer bonds are purchased than is the case with the traditional indices of the FTSE Russell and Bloomberg families. This approach makes it possible to reduce the risk associated with individual issuers and achieve a better overall return without deviating significantly from the nature of the benchmark index. Systematically constructed bond portfolios can therefore generally outperform traditional bond indices slightly. This has also been the case so far in 2026.
3) Investing focused on a few securities (Warren Buffett/Charlie Munger/Hendrik Bessembinder)
The majority of our active managers have had a very good year so far; however, we note that some of the managers who have deliberately stayed out of the semiconductor and AI sectors are suffering from a significant underperformance. The manager of the CT Global Technology Fund, who has been highlighted on several occasions, managed to recoup the previous month’s losses in August and, in our view, represents a very good long-term solution for investments in the technology sector.
Our Model Portfolio Performance
We use the Dimensional World Allocation Portfolios as our standard model portfolios, as they provide a highly representative picture of global financial markets, are very cost-effective to acquire and cover all our FairHorizons across all relevant currencies (USD, EUR, GBP and SGD). All six components have had an exceptionally good year so far, which is primarily due to the strong performance of the Dimensional equity strategy. It is currently benefiting significantly from the strong performance of small-caps as well as the overweighting of the value factor.
Due to their very low costs, we are happy to showcase these strategies to our community members who are very dissatisfied with the asset management services provided by major banks.
The current performance of the Dimensional portfolios is very encouraging and reinforces the fact that it can be worthwhile to stick with the same strategy over the long term. I would even go so far as to suggest that these portfolios outperform more than 90% of all asset management services offered by private banks and independent providers. This is because the low costs and systematic approach cannot be replicated by private banks and are often derided by ‘would-be Warren Buffetts’.
For investors whose reference currency is EUR or GBP, Vanguard also offers a range of investable model portfolios (Vanguard LifeStrategy), which likewise serve as an alternative to the asset management services provided by private banks.
Furthermore, for Euro-denominated investors, there are a few interesting solutions for the FairHorizons Yellow (7–10 years) (e.g. ARERO).
All the strategies mentioned have had a good to very good year so far, although the outperformance of the Dimensional World strategies is particularly striking!
Outlook – Government Bonds Under Pressure, Opportunities in Equities and Commodities
Following the positive performance of global equity markets in August, I am currently focusing primarily on rising interest rates for long-dated government bonds in the United States, Japan and Europe. This clearly reflects investors’ scepticism regarding the sustainability of government debt in the individual countries. Alongside Japan and the US, France is also considered a cause for concern.
There are now significant term premiums on long-term bonds of up to 1.5% p.a, which had completely disappeared during the Covid pandemic and the period of low interest rates. At the time, it was claimed that term premiums were unnecessary, as there was no longer any inflation and investors therefore did not need to be compensated for holding investments over longer time horizons!
In the 1970s and 1990s, term premiums ranged between 1.5% and 4% per annum and, particularly in the 1970s, reflected concerns about the oil crisis and associated inflation expectations.
Owing to the prolonged period of disinflation following the fall of the Berlin Wall, term premiums fell steadily, as bond buyers had greater confidence in the stability of the financial system and the inflation outlook. This has changed again and it remains to be seen whether the current period is more comparable to the 1970s or 1980s.
It is impossible to say where this will ultimately lead: on the one hand, current inflation rates are considerably lower than in the 1970s and early 1980s; on the other hand, government debt is significantly higher than it was back then.
Seen in this light, perhaps a term premium should currently reflect not so much the inflation risk as the potential restructuring risk associated with government bonds!?
As interest rates on government bonds with short and medium-term maturities already appear attractive, we would therefore remain cautious regarding long-dated bonds and postpone purchases whilst risk premiums continue to widen. Bonds from emerging markets, as well as high-yield bonds, appear to be a good alternative to complement equity portfolios.
As for the equity markets, following a strong August, they could perhaps take a breather in September, particularly given the sharp rise in oil and gas prices resulting from the reignited crisis in Iran.
The technical picture for many broad-based share indices suggests a degree of consolidation, which is why I am not expecting to miss too much at present.
As has been emphasised on several occasions, the respective valuation of a financial instrument is ultimately the best guide for an investor. So, if we look at the current valuations of high-return and safety components in our high-rise charts (pages 7–10), we can see that the current yields on the safety components are all above the expected medium-term inflation rate of around 2% p.a., regardless of the investment horizon (FairHorizons: purple to green).
Even the returns on money market investments are close to current inflation rates and help preserve purchasing power, although we have to contend with the sharp rise in oil and gas prices.
With regard to the high-return components we select for longer-term investment horizons (FairHorizons yellow to red), we always communicate a minimum target return of 6% p.a. or a projected long-term return of between 6 and 8% p.a. This corresponds to price-to-earnings ratios (P/E ratios) of between 14 and 17. The majority of all high-return components currently have valuations that make these long-term returns possible. Only the Nasdaq 100, the S&P 500, the MSCI World and the MSCI World Quality Index are significantly below this level, which is why these indices could lag behind the performance of other markets in the coming years. It could be argued, however, that these indices represent the best and most profitable companies in the world, even if they are not currently cheap to buy. Perhaps these companies are, after all, a safer bet than long-term bonds issued by heavily indebted countries!? Equities in Europe, Asia and emerging markets carry risk premiums (i.e. target returns) of between 7 and 8% p.a., which is why we have no hesitation in taking a long position here.
The valuations of the components of our ‘Losers of 2025’ – namely Indian equities, REITs, quality factor index ETFs & quality fund managers, the healthcare sector and listed private equity firms – remain attractive to very attractive. The healthcare sector is already benefiting from a rotation out of the technology sector, and the Indian market also appears to be stabilising. In my view, valuation levels here are very attractive and should be used as an entry point. The same applies to shares in private asset managers. They can now be added to broadly diversified portfolios as ‘satellite investments’, even if they appear overbought in the short term.
Shares in precious metals and copper producers recovered well in August, but remain very attractively valued and can serve as a portfolio diversifier. The same applies to our preferred commodity investments.
The reality of global conflicts and spiralling government debt in the developed world remains unchanged and tends to be inflationary, which has a positive effect on commodity prices. Anyone who has considered an allocation of around 10–15% to commodities since 2020 has been able to significantly optimise a portfolio consisting of stocks and bonds. We would therefore use commodity corrections as an opportunity to build up a 10–15% allocation within a portfolio. Over the long term, investments in metals and precious metals have outperformed commodities that must be acquired via futures, which involve significant (roll) costs and erode returns. These include, in particular, energy and agricultural commodities, which account for around 60–70% of some commodity indices. This explains our preference for metals and precious metals, or shares in metal and precious metal producers.
As regards our three preferred investment styles, we can emphasise once again that all three strategies perform very well in the long term, even if they may prove disappointing in the short term. Investors should therefore definitely stick to their chosen investment styles and not change them simply because of short-term disappointment.
Anyone wishing to simply follow current trends with new capital should continue to look into value strategies as well as multi-factor strategies. The positive trend of recent years appears to be continuing, and valuations remain favourable.
Please also take a look at our new Avantis Global Small Cap Value ETF (R79-F), which screens small companies based on the value factor. It has performed exceptionally well over the long term and complements our very popular small-cap component from Janus Henderson very well. The Avantis team originally worked at Dimensional Fund Advisors and is therefore well versed in value strategies. Interestingly, traditional fund and ETF providers do not offer a comparable portfolio, which is why we turned to Avantis.
As a general rule, we recommend indexing for money market investments, active management for most bond strategies, and a mix of indexing and stock picking for equity investments. This is how we manage our own portfolio, and we’re delighted when we see the positive results.
Please also look at our standard investment portfolio ideas on pages 36-38, which follow the principles of investment legends like Jack Bogle, Eugene Fama/Kenneth French and Warren Buffett/Charlie Munger. Whilst all of them represent different investment philosophies, they’re all very effective and successful in the long term.
If you are worried whether your portfolio is well equipped for the significant changes in today’s world, just get in touch with us. We’ll be more than happy to check it for you. Otherwise, I would be delighted if you could tell your friends and family about Das Family Office so that they can also become part of our community.
With best wishes for a beautiful autumn!
Yours,
Mario Becker
- (purple) Up to 1 Year: Invest in money market funds P5-I, P7-A or Portfolio 1.
- (blue) Up to 4 Years: Invest in Portfolio 2 or combine B15-A and O1.1-I in an 80/20 ratio.
- (green) Up to 7 Years: Invest in Portfolio 3 or combine B15-A and O1.1-I in a 60/40 ratio.
- (yellow) Up to 10 Years: Invest in Portfolio 4 or combine B15-A and O1.1-I in a 40/60 ratio.
- (orange/red) More than 10 years: Invest in Portfolio 6 or in one of our various portfolio strategies.
