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What happened in the last month?

In focus: Improving business confidence

Is the U.S. economic slowdown coming to an end? After months of deterioration, August brought at least a mixed picture for key macroeconomic indicators—and in today’s environment, even that counts as good news. The S&P Global U.S. Manufacturing PMI rose to 53 points in August 2025 (readings above 50 signal expansion), marking the strongest improvement in business conditions since May 2022.

The most notable driver was the increase in new orders, suggesting that the corporate sector has regained confidence after the global turbulence caused by Donald Trump’s tariff policies.

Of course, it’s not all smooth sailing. Tariffs and supply chain uncertainties have weighed on hiring, with U.S. companies adding disappointingly few new jobs over the summer. The housing market is also struggling under the pressure of high interest rates—there is no “Home Start” program in the U.S., and the fixed rate on a 15-year mortgage stands at a minimum of 5.5% annually.

Meanwhile, Europe is slowly gaining momentum. According to a survey by Hamburg Commercial Bank, the eurozone manufacturing PMI climbed in August to 50.7 points—its highest level in more than three years, and just above the threshold that separates growth from contraction. Among the larger economies, Spain is leading the way with 54.3 points, while France posted 50.4 (a 31-month high) and Germany 49.8 (a 38-month high).

Equity market news

Wall Street shows no signs of slowing: the S&P 500 hit 6,500 points for the first time since its inception in 1957. Major indices have now risen for four consecutive months (five in the case of the tech-heavy Nasdaq). Stocks gained on the back of easing trade tensions and stronger-than-expected corporate earnings.

For Q2, the S&P 500’s combined earnings per share grew 11%, far above the 4% consensus. The “Magnificent 7” tech giants posted an even stronger 26% growth (12% above expectations). Still, AI-focused companies are facing tougher comparisons against lofty expectations: Nvidia recorded its first monthly loss since March, slipping 3.36% in August due to weaker sales in China. Nevertheless, its stock remains up nearly 30% year-to-date.

Europe, however, underperformed. STOXX 600 earnings exceeded expectations by just 1.5%. The EU’s trade agreement heavily favors the U.S., while the strong euro weighs on exports. Political turmoil in France and Germany adds uncertainty. Central Europe also faces headwinds: Poland’s plan to raise the corporate tax on banks to 30% by 2026—to fund defense spending—has shaken investor confidence, sending Warsaw equities lower. Hungary’s experience shows that such sector-specific taxes often remain in place for years.

Bond market news

U.S. Treasury yields fell after Fed Chair Jerome Powell signaled rate cuts ahead. Current dollar interest rates remain high: the yield on 10-year Treasuries has hovered above 4% for nearly three years—something last seen in 2007. This rate level is considered restrictive, weighing on growth. A cut in the current 4.33% Fed funds rate could come as early as September, though the main beneficiaries would be shorter maturities. Investors remain more cautious about 10–15 year bonds due to inflation and fiscal deficit concerns.

Central and Eastern European government bonds continue to stand out. Hungarian 10-year bonds yield 7.2%, compared with 2.7% for German Bunds. Meanwhile, Poland’s rate-cutting cycle—bringing the policy rate down from 5.75% in spring to 4.75% in September—may further support its local bond market. Reduced domestic issuance in Hungary and low foreign positioning in Poland are also positive signals for regional bonds.

Alternative investments news

Gold has surged to an all-time high, surpassing its April record. The price crossed $3,500 per ounce, up 34% year-to-date, driven by the weak dollar and the prospect of U.S. rate cuts in September. Silver followed, hitting a 14-year high of $40.8.

Safe-haven demand is being reinforced not only by lower rates but also by concerns over the Fed’s independence. President Trump has pressured Chair Powell to ease policy aggressively and even dismissed Governor Lisa Cook for resisting sharp cuts. While Trump’s forced rate cuts could stoke inflation, they also raise doubts about the stability of the U.S. financial system, further fueling demand for precious metals.

 

What can we expect in the coming period?

Investment clock

After several months of recessionary and stagflationary stagnation, the global economy has suddenly pivoted and is now pointing toward strong growth. According to the VIG Fund Management Investment Clock forecasting model, a sustained shift requires confirmation over three consecutive months. Still, we have chosen to extend our confidence and moved the indicator into the Expansion phase.
The direction is encouraging: the global growth outlook has improved significantly, while oil prices have been on a downward trend since mid-summer. At the same time, notable differences remain across major geographic regions.

The U.S. finds itself caught between stagflation and expansion. Labor market data in August showed far fewer new jobs than preliminary estimates suggested. While conditions have improved somewhat since then, the labor market is clearly weakening—making consumers more pessimistic as their potential incomes become uncertain. Inflation remains stable, with prices for basic goods declining despite higher tariffs. Housing price growth, alongside rental costs, is moderating. The Federal Reserve—partly under pressure from President Trump—may begin to lower interest rates to stimulate the economy.

In Europe, the growth outlook is improving, driven mainly by domestic demand. The eurozone’s manufacturing sector is still heavily influenced by two opposing forces: tariffs remain a significant burden, while the structural shift toward the defense industry provides support. Inflation is stable (averaging 2.1% in August), and slow but steady growth is being underpinned by more moderate wage increases.

China, by contrast, continues to face deflation and slowing economic activity. Falling prices for both new and existing homes highlight weakening purchasing power and challenges in the business sector. The government has announced plans for strong policy measures to counter these issues, but restoring consumer confidence will take time.

 

The clock indicator denotes the current economic cycle phase. Faded indicators reflect the previous situation.

Tactical Asset Allocation

In line with the latest economic and capital market trends, we have made adjustments to our asset allocation. Compared to last month, the changes are modest: we have upgraded emerging market equities to a slight overweight.

A Good Opportunity for Risk-Takers – Emerging Market Equities

The outlook for emerging markets is stabilizing, supported by clearer U.S. trade agreements and the sustained weakness of the U.S. dollar. The dollar is expected to continue weakening once the Federal Reserve—likely starting in September—begins cutting interest rates. While U.S. tariffs may weigh more heavily on economies in the coming months, we anticipate steady earnings growth and a gradual recovery across developing economies.

Valuations remain attractive: emerging market equities trade at a P/E ratio of 13.2, compared to 22.8 in the U.S.. This relative discount makes them appealing, while higher-than-average yields offer potential extra returns through local currency appreciation.

In the Spotlight – Hungarian Bonds

Hungarian bonds remain a favorite for investors seeking moderate risk. Yields on forint-denominated government securities are high even by international standards: a 10-year Hungarian bond still offers 7.2% per year, while U.S. Treasuries of the same maturity yield just 4.2%.

With the Federal Reserve expected to cut rates, this yield advantage may widen further.Inflation in Hungary is on a downward path, meaning the MNB (Hungarian central bank) has no need to raise rates—and may even cut them to stimulate the stagnant economy. A potential improvement in the Russia–Ukraine conflict could add further upside potential.

 

The weights indicate the evaluation of the respective country, region, and asset class, providing a basis for portfolio managers in structuring portfolios and establishing positions, thus helping to capitalize on market opportunities.

Weights:

Changes – change compare to the the previous month

The table was prepared based on our investment clock and quadrant modell**.

Focus fund: VIG Moneymaxx Emerging Markets Absolute Return Investment Fund

The Fund’s portfolio has an increasing share of emerging market assets, which are well positioned to deliver above-average performance in the coming month. More than 30% of the Fund’s investments are in emerging market equities, with the remainder in emerging market bonds—allowing it to benefit from the potential appreciation of both asset classes.

The outlook is strong for both. As the weakening U.S. dollar drives capital outflows from America, emerging economies are a prime destination: their bonds offer a significant yield premium compared to U.S., European, or Japanese counterparts, while their companies’ above-average earnings growth supports equity market valuations.

Emerging market stocks also remain undervalued: based on the P/E ratio—a key valuation metric—these markets trade at 13.2x earnings, well below the 22.8x multiple in the U.S. At the same time, corporate profit growth is faster, and markets are rich in compelling stories. In the strategically important semiconductor industry, Taiwanese and South Korean chipmakers are even being discussed as potential tariff exemptions in exchange for U.S. investments. In Central Europe, a resolution to the Russia–Ukraine war could also bring significant revaluation potential.

Based on our expectations (based on tactical asset allocation), the fund of the month may outperform in the near future.

Disclaimer

This is a distribution announcement. In order to make well-founded investment decisions, please inform yourself thoroughly regarding the Fund’s investment policy, potential investment risks and distribution in the Fund’s key investment information, official prospectus and management regulations available at the Fund’s distribution outlets and on the Fund Manager’s website (www.vigam.hu). Past returns do not predict future performance. The future performance that can be achieved by investing may be subject to tax, and the tax and duty information relating to specific financial instruments and transactions can only be accurately assessed on the basis of the individual circumstances of each investor and may change in the future. It is the responsibility of the investor to inform himself about the tax liability and to make the decision within the limits of the law. The information contained in this leaflet is for informational purposes only and does not constitute an investment recommendation, an offer or investment advice. VIG Asset Management Hungary Closed Company Limited by Shares accepts no liability for any investment decision made on the basis of this information and its consequences.