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Please see the below article from Brewin Dolphin discussing the first-half 2026 equity market recap, highlighting broad market gains, strong earnings growth, the leadership of semiconductor and AI-related stocks, and the renewed strength of small- and mid-cap companies, received yesterday 02/07/2026.

With semiconductor stocks significantly outperforming and driving most of the S&P 500’s 10.2 percent total return in the first half of the year, it’s tempting to relegate this to just a narrow advance.

However, the rally actually was quite broad:

• Seven of 11 S&P 500 sectors delivered above-average gains, and five sectors outperformed the index in the first half
• The S&P 500 Equal Weight Index jumped 12.1 percent including dividends, outpacing the capitalisation-weighted, Technology-heavy S&P 500
• The S&P indexes of small-cap and midcap stocks surged 23.9 percent and 17.3 percent including dividends, respectively, far exceeding large-cap indexes

The U.S./Israel war with Iran, along with the related oil price spike and inflation, briefly jolted the market in March.

But the market quickly looked past those events as investors focused on very strong Q1 earnings growth and, importantly, meaningful upward revisions to profit estimates.

The S&P 500 consensus 2026 earnings growth forecast jumped from 13.6 percent at the beginning of the year to 23.3 percent by the end of June – a very unusual leap in such a short time, especially at this advanced stage of the economic cycle. The 2027 forecast currently calls for 16.1 percent growth.

Sturdy economic data and little-to-no tangible signs of economic deterioration on the horizon also supported stock prices. The consensus forecast of economists sees U.S. GDP growth at 2.1 percent for this year and next, roughly the long-term average level.

A new all-time high for the S&P 500 on strong earnings growth, overcoming the prior round of Middle East headwinds

Source – RBC Wealth Management, Bloomberg; data through 6/30/26

A small-cap and midcap renaissance

After years of underperformance, small-cap and midcap indexes surged in the first half for a few main reasons:

• These indexes include semiconductors and other stocks tied to the AI data centre buildout, which led the broader market
• Small-cap consensus earnings growth estimates started to improve and, importantly, 2027 estimates currently outstrip those for the S&P 500
• The relatively inexpensive valuations of small caps and midcaps compared to large-cap indexes were finally rewarded by investors

Strong returns for equity indexes with small caps well in the lead

First-half 2026 total returns of key indexes and styles (includes dividends)

* Dividend Growth based on S&P 500 Dividend Aristocrats Index.

Source – RBC Wealth Management, Bloomberg; data range 12/31/25–6/30/26

Going forward, if domestic economic growth remains sturdy, we think these areas of the market can benefit. Small caps, for example, tend to do well when manufacturing and job growth trends are strong, a pattern RBC economists expect to persist.

However, if interest rates start to rise later this year or next year either due to nagging inflation and/or upward wage pressures, this could constrain small-cap stocks. They tend to lag large caps when the U.S. Federal Reserve becomes hawkish.

Regardless of the near-term outlook, small-cap and midcap positions remain important components of equity portfolios, from our vantage point. Their recent outperformance illustrates the benefits of diversification.

Despite the recent rally, small-cap ownership among institutional investors is still much lower than normal, according to equity futures data. This provides room for such investors to add to positions over time.

“Semi-charmed” performance

Within the large-cap S&P 500, different stocks sat atop the leaderboard in the first half compared to recent years.

Performance previously had been dominated by the Magnificent 7 stocks – Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla – some of which are AI hyperscalers.

While the top stocks in the first half of 2026 were still tied to the AI theme, the performance leadership mostly flipped from hyperscalers to so-called “picks and shovels” – semiconductors (including memory) and related tech stocks. Nine of the 12 biggest contributors to S&P 500 gains were semiconductor and memory stocks.

All but three of the top contributors to S&P 500 gains were semiconductor stocks

Percentage contribution to the S&P 500’s 10.2 percent total return in the first half of 2026

* Stocks listed from largest to smallest contribution.

Source – RBC Wealth Management, FactSet; total return data (includes dividends); data range 12/31/25–6/30/26

This is due to hundreds of billions of dollars being spent on building AI data centres, which are being equipped with advanced chips and other hardware. At the same time, there is limited supply of chips and memory worldwide, so prices of these and related component parts surged – and so did revenues, earnings and forward consensus estimates.

As a result, the widely followed SOX Index – the Philadelphia Semiconductor Index – rallied just over 100 percent in the first half, with leading memory firm Micron Technology surging an eye-watering 304 percent, chipmaker Advanced Micro Devices advancing 171 percent and U.S. government-tied Intel jumping 278 percent. These three stocks alone represented a combined 34 percent of S&P 500 gains in the first half.

While we think it’s too early to declare the semiconductor run over due to ongoing AI data centre demand amid a global chip shortage and high selling prices, volatility and pullbacks in these stocks should be expected in the months ahead, especially after such a lightning-fast run.

To manage risk, we think investors should be vigilant about single-stock and industry exposures in portfolios by bringing them back to reasonably sized positions if they’ve drifted well out of bounds.

Broadly speaking …

Despite the fact that semiconductor stocks absolutely dominated the S&P 500, performance wasn’t as narrow as it might seem:

• Nine of 11 sectors rose during the period, and a diverse group of five outperformed the S&P 500
• Industrials led the market
• Energy performed nearly on par with Technology due to a surge in profit growth and consensus estimates tied to the jump in oil prices because of the Middle East conflict
• 16 of 25 major industry groups (a level below sectors) rose
• 62 percent of S&P 500 stocks rose
• The average and median S&P 500 stock gains were 13.2 percent and 7.4 percent, respectively, including dividends

Five diverse sectors outperformed the S&P 500 in the first half of 2026

S&P 500 and sector total returns (including dividends)

• First-half 2026 total returns

Source – RBC Wealth Management, FactSet; data range 12/31/25–6/30/26

Utilities: +7.69%, +65.7%. Health Care: 3.45%, 39.0%. Communication Services: +0.80%, +192.8%. Consumer Discretionary: -0.77%, +79.4%. Financials: -1.18%, +94.0%

Equal opportunity

The outperformance of the S&P 500 Equal Weight (every stock impacts the movement of the index the same) compared to the capitalisation-weighted S&P 500 (the largest stocks impact the movement of the index more) was one of the main first-half surprises. The former rallied 12.1 percent, while the latter rose 10.2 percent.

The reason this occurred is because the 10 largest stocks in the S&P 500 by market cap underperformed significantly as a group. This list includes NVIDIA, Apple, Alphabet, Microsoft, Amazon.com, Broadcom, Meta Platforms, Tesla, Berkshire Hathaway and JPMorgan Chase.

• The 10 largest stocks rose only 1.14 percent, on average, including dividends
• Microsoft was the worst performer, dropping 22.5 percent
• Meta Platforms was next, declining 14.5 percent
• Tesla was third worst, pulling back 6.5 percent
• The best-performing stocks among the 10 largest were Alphabet A shares (+14.3 percent), then NVIDIA (+7.4 percent) and Apple (+6.6 percent)

In recent years, S&P 500 Equal Weight leadership has been fleeting. Its ability to sustain outperformance will likely be determined by whether the 10 largest stocks can bounce back and therefore push the S&P 500 in the lead again.

We think at least a couple of the hyperscalers have the potential to perform better in the near term given their valuations look reasonable and revenue and earnings growth prospects for the rest of this year and next still seem attractive.

Invested, but vigilant

Various market breadth indicators – data that measure the proportion of stocks advancing versus those declining – also confirm that first-half performance wasn’t a one-hit semiconductor wonder as they reached new highs recently.

This normally doesn’t happen when the market has already peaked for the cycle. This development leads us to believe the U.S. bull market, which began in Oct. 2022, has further to go – albeit with some bumps along the way.

While we wouldn’t be surprised if noise surrounding the U.S. midterm elections in November and/or jitters about Fed policy create some waves for the market during the second half of 2026, we suggest maintaining a Market Weight position in U.S. equities.

Please continue to check our blog content for the latest advice and planning issues from leading investment management firms.

Marcus Blenkinsop

3^rd July 2026

Please see below the daily update article from Brooks Macdonald, received this morning – 01/07/2026

What has happened?

Risk assets ended Q2 on a strong footing, helped by easing Middle East tensions, lower oil prices and continued enthusiasm around AI. The S&P 500 rose for a second day, led by the Mag 7 and semiconductors, although breadth was weaker beneath the surface. European equities also advanced, with the STOXX 600 reaching a fresh record high as softer inflation prints reduced pressure on the ECB. Bond markets were more mixed, with US Treasury yields rising after stronger-than-expected job openings and hawkish Fed commentary, while Brent crude remained subdued following progress in US-Iran talks.

Growth v Inflation

The key theme remains the tension between resilient growth and stubborn inflation risks. US labour demand continues to look firm, with job openings surprising to the upside, but consumer confidence, housing data and business surveys point to a more uneven economy. At the same time, the AI investment cycle remains a powerful market driver, particularly for semiconductors, with South Korean exports surging and the Philly semiconductor index posting an exceptional quarter. This combination of strong AI-led earnings momentum and uncertain macro data is keeping markets supportive but narrow.

What does Brooks Macdonald think?

The recent rally has been underpinned by a favourable mix of falling energy prices, reduced stagflation fears and resilient corporate earnings expectations. However, the narrow leadership from mega-cap technology and semiconductors suggests investors should be cautious about extrapolating headline index strength too broadly. Central banks are likely to remain data-dependent, with lower oil prices easing near-term inflation pressure in Europe, while stronger US labour data keeps the Fed debate more finely balanced. Overall, sentiment remains constructive, but markets may need broader participation and clearer evidence of disinflation to sustain momentum into H2.

Please continue to check our blog content for advice, planning issues and the latest investment market and economic updates from leading investment houses.

Cherise Lancaster

01/07/2026

Please see below the daily update article from Brooks Macdonald, received this morning – 30/06/2026

What has happened?

Markets enjoyed a broad risk-on move yesterday, led by a rebound in mega-cap tech. The Mag 7 rose +2.58%, helping the S&P 500 gain +1.18% and snap a five-day losing streak. The index remains on course for its strongest quarterly return since the post-pandemic rebound in 2020. Tesla (+8.46%), Alphabet (+4.79%) and Amazon (+3.20%) were among the standout performers. Market leadership was not confined entirely to mega-cap technology either, with both the equal-weighted S&P 500 (+0.18%) and the Russell 2000 (+0.01%) edging higher to fresh record highs. In Europe, performance was far more subdued, with the STOXX 600 finishing broadly unchanged (+0.04%).

Fed independence in focus

In a 5-4 decision, the US Supreme Court ruled that Fed Governor Lisa Cook can remain in her role while challenging President Trump’s attempt to remove her, reaffirming that Fed officials cannot be dismissed without evidence of wrongdoing. The ruling was made more notable by a separate decision allowing presidents greater freedom to remove senior officials at other independent agencies, effectively strengthening executive authority across much of the regulatory system. Taken together, the decisions reinforce the Fed’s unique status, while also highlighting a broader shift in the balance of institutional power.

What does Brooks Macdonald think?

Today’s focus shifts back to Euro area inflation, with flash June CPI readings due from Germany, France and Italy. The releases will be closely watched after Spain’s data surprised to the upside yesterday, with inflation holding at 3.6% against expectations of 3.4%. For the ECB, the recent decline in energy prices has generally supported the case for fewer rate hikes, but upside surprises in inflation data could complicate that narrative.

Bloomberg as at 30/06/2026.

Please continue to check our blog content for advice, planning issues and the latest investment market and economic updates from leading investment houses.

Alexander James Roberts

30/06/2026

Please see the below article from Tatton Investment Management discussing quarter-end market rebalancing, easing oil prices, AI market momentum and the calm gilt market response to Andy Burnham’s economic outlook, received this morning – 29/06/2026.

Mind the money flow at quarter-end
Markets wobbled thanks to quarter-end rebalancing. Institutional investors are selling winners to bring portfolios back in line after a strong quarter. Rebalancing is temporary, although the scale of the sell-off hints that liquidity is becoming less abundant and that the second half of 2026 could (and probably should) be less spectacular.

The Middle East conflict becomes less impactful with each passing week despite the nagging sense of danger and the continued violent spats. The weekend’s disturbances pushed the December 2026 Brent crude oil future price to $73pb, but that’s only up about a dollar from Friday’s level. The relative calm in energy markets is allowing equity markets to open calmly at the start of this week.

UK equities rose despite most regions falling, and UK bond yields fell more than others. Markets look sanguine about Andy Burnham’s ascension, which we cover below.

Oil’s fall to pre-war levels is good news for inflation and growth.  However, counterintuitively, the scale of loss in asset value could be weighing on broader asset markets’ sentiment. Speculation in energy contracts has been rampant in recent months, so falling oil prices mean losses for speculators. They must sell other assets to cover positions – compounding the rebalancing pressure on liquidity.

Chip manufacturers have stormed ahead this quarter, but investors are now nervous after months of gains. Even Micron’s jaw-dropping earnings – profits fifteen times higher than a year ago – couldn’t engender a push in US equities to new highs.

The dollar is breaking out of its recent weak range, gaining even against the renminbi. That tightens financing conditions globally. There’s some debate about whether the renminbi’s strength over the last 18 months was deliberate, or a knock-on effect of renminbi-denominated commodity contracts. Regardless, we expect Beijing will want depreciation from here, to aid China’s struggling economy.

AI bubble talk is back. But it doesn’t look like a classic valuation bubble; price-to-earnings valuations have fallen this year as tech profits have exceeded share price gains. It could be an earnings bubble (falling compute costs and chip inflation being passed onto consumers are bad signs) but AI demand is rising too. Growth is strong and will likely get stronger when datacentre construction ramps up, so the party can go on.

Investors are understandably nervous after several strong years. But the fundamentals look good for the medium-term. You wouldn’t want to get off this bus just yet.

Andy’s Economics

Andy Burnham’s rise hasn’t spooked gilt markets – quite the opposite, in fact. Past comments notwithstanding, markets expect the PM-in-waiting to be another post-Truss fiscal realist. Investors expect tweaks to economic policy, but no overhaul.

Gilt markets’ serenity is partly about Burnham’s advisers. Richard Hughes, former OBR head, is an orthodox pick designed to project fiscal credibility. The other two are more interesting. Jim O’Neill – Goldman Sachs veteran and coiner of “BRICs” – urges more borrowing for investment. Andy Haldane, former Bank of England chief economist, has floated a UK “War Bond” to fund defence outside standard balance sheet rules, and called for sweeping tax reform – including a land value tax and an overhaul of stamp duty and council tax.

More important is the Chancellor pick, of course. Once-rival Wes Streeting looks the most likely. He’s no economist, but he’s fiscally conservative enough to calm gilt investors. The fiscal rules will be tweaked – like they always are – but borrowing changes don’t need to rattle gilts if they’re properly formulated and communicated. Haldane wants to add long-term cost-benefit policy assessments to the OBR’s forecasts, potentially creating more room to invest. His War Bond could also be a major growth benefit – in the same way markets cheered Germany’s historic defence package. Burnham will stick to the spirit of the fiscal rules, not the letter.

We’ve repeatedly argued that external factors and structural imbalances are more important for gilts than domestic politics. That’s still true, but the fact UK-US yield spreads fell this week (and crucially, UK yields dropped even as US yields rose) suggesting gilt traders are genuinely pleased.

It helps that the advisers are broadly fiscally conservative — O’Neill and Haldane favour more borrowing, but offset by cuts elsewhere. Haldane thinks the pension triple lock is unsustainable; a change before the next election seems likely. Don’t overread the Burnham-gilt connection, but the stable outlook is helping.

Greenspan-ism lives on

The Fed Chair is Dead; long live the Fed Chair. Legendary central banker Alan Greenspan has passed away at 100, but his influence lives on in new Fed chair Kevin Warsh. Warsh borrows liberally from Greenspan’s playbook: deregulation, a belief that technology will tame inflation, and a desire to keep markets in the dark. It’s a seductive template, but Greenspan’s record is messier than the legend suggests.

The 1990s boom – the highlight of Greenspan’s tenure – was powered by real productivity gains from the internet revolution. The story goes that Greenspan’s insistence on keeping rates low, against colleagues’ wishes, allowed the economy to flourish. Reality is more complicated: US inflation did, in fact, rise substantially into the new millennium, and the Fed did in fact raise rates (because growth pushed up the ‘neutral’ rate).

Greenspan’s commitment to free markets was always selective: he was quick to hand out central bank support when things went wrong, inflating the ‘Greenspan put’ that helped fuel the dotcom bubble. His Fed started buying mortgage-backed securities in the aftermath, eventually creating the 2008 financial crisis.

Warsh’s parallel is striking. He thinks AI will do what the internet did – hold back costs and keep inflation low. He wants deregulation, greater private money creation (through reduced Fed liquidity provision), and less forward guidance.

But the AI era is missing something the dotcom era had: hypercompetition. Internet companies fought intensely on price and the internet itself was free. AI’s supply chain is dominated by a handful of providers, and none of it comes cheap. Those costs bolster AI profits, but they also slow adoption – and ultimately slow the productivity gains Warsh is banking on.

Warsh may well avoid Greenspan’s worst mistakes. He’s clearly learned much from “the maestro”, but learning doesn’t always mean repeating.

Please continue to check our blog content for the latest advice and planning issues from leading investment management firms.

Marcus Blenkinsop

29^th June 2026

Please see below the daily update article from Brooks Macdonald, received this morning – 26/06/2026

What has happened?

A broadly supportive backdrop of softer inflation data and slightly more dovish Fed pricing helped equities, even as weakness in large-cap tech weighed on headline indices. The S&P 500 (-0.01%) edged into a 4^th consecutive decline, dragged lower by a sharp fall in the Mag-7 (-2.54%), with Apple down -6.12% after announcing price increases. Beneath the surface, performance was stronger. The equal-weighted S&P 500 (+0.67%) and Russell 2000 (+0.71%) both advanced. Semiconductors also outperformed, with Micron surging +15.7% after strong results. In Europe, reduced expectations for further ECB tightening supported markets, pushing the STOXX 600 (+0.80%) to a record high alongside gains across major indices.

Softer inflation eases rate pressure

US PCE inflation for May came in slightly softer than expected, offering some relief to markets. Headline PCE rose +0.4% month-on-month (vs. +0.5% expected), while core PCE printed at +0.3%. This helped to modestly ease rate expectations, with markets pricing around 34bps of tightening by December. While Fed officials continue to stress that inflation remains elevated, rates markets responded at the margin, with the 2-year Treasury yield falling to 4.12%, while the 10-year was little changed. Other data reinforced the picture of economic resilience, with jobless claims falling to 215k and Q1 GDP revised up to +2.1%.

What does Brooks Macdonald think?

Weakness in mega-cap tech has masked resilience elsewhere, with broader equities continuing to perform well. At the same time, softer inflation is giving markets confidence that central banks may not need to tighten much further, even as policymakers remain cautious. This keeps rate expectations finely balanced and markets sensitive to incoming data.

Please continue to check our blog content for advice, planning issues and the latest investment market and economic updates from leading investment houses.

Alexander James Roberts

26/06/2026

Please see below the daily update article from Brooks Macdonald, received this morning – 25/06/2026

What has happened?

Equity markets showed signs of stabilisation after losses earlier in the week, supported by easing oil prices and improved sentiment around tech. The S&P 500 (-0.10%) was largely unchanged. Beneath the surface, nearly two-thirds of constituents rose, lifting the equal-weighted S&P 500 by +0.71%. In contrast, the Mag 7 (-0.82%) continued to lag, leaving the group -11.6% below its late-May peak and in correction territory. In Europe, the STOXX 600 (+0.08%) edged modestly higher.

Falling oil and upbeat tech earnings lift sentiment

Two developments underpinned sentiment. First, Brent crude has retraced to pre-conflict levels, falling to $72.49/bbl, broadly in line with where it stood before the late-February escalation. This reflects improving supply conditions, with vessel flows through the Strait of Hormuz now at their highest since the disruption began. Second, Micron’s results provided a positive signal for the tech sector. Its $50bn revenue outlook for the fiscal fourth quarter exceeded the $43.2bn consensus, reinforcing confidence in AI-driven demand. The stock rose nearly 16% in after-hours trading, helping to offset concerns about a broader unwind in mega-cap tech.

What does Brooks Macdonald think?

Easing geopolitical pressure, combined with continued earnings support in parts of the technology sector, is helping to steady markets. However, the shift in market leadership remains notable. The underperformance of mega-cap stocks alongside improving breadth suggests a transition may be happening. Looking ahead, today’s US May PCE inflation release and the latest revision to US Q1 GDP should provide further clarity on the balance between growth resilience and disinflation.

Bloomberg as at 25/06/2026.

Please continue to check our blog content for advice, planning issues and the latest investment market and economic updates from leading investment houses.

Cherise Lancaster

25/06/2026

Please see below the daily update article from Brooks Macdonald, received this morning – 24/06/2026

What has happened?

Markets saw a classic risk-off move yesterday, with equities slipping and bonds rallying. The main driver was a sharp selloff in tech. The Philadelphia Semiconductor Index dropped -7.87%, with names like Sandisk (-13.64%) and Micron (-13.18%) leading losses in the S&P 500, despite still being among the top performers year to date. The NASDAQ fell -2.21% and the S&P 500 declined -1.44%. What really stood out, though, was how concentrated the move was. It was the first time this year that the S&P 500 fell by more than 1% while most of its stocks actually rose. In Europe, the STOXX 600 lost -0.73%, its weakest session in three weeks, again led by tech. Meanwhile, Brent crude slipped -1.05% to a three-month low of $77/bbl.

UK data softens rate expectations and supports gilts

In the UK, gilts performed well after weaker-than-expected flash PMI data. The composite reading fell to 49.4 (versus 50.5 expected), staying in contraction. Alongside lower oil prices, this has strengthened the view that the Bank of England may not need to raise rates again this year. As a result, the 10-year gilt yield fell -5.4bps to 4.75%, a larger move than in other major European markets.

What does Brooks Macdonald think?

What is interesting is that the equity weakness came despite fairly encouraging macro data. June flash PMIs generally came in ahead of expectations, suggesting the global economy is holding up better than feared despite ongoing energy pressures. In the US, the composite PMI rose to 52.2 (versus 51.1 expected), its highest level in five months, while the Euro Area reading also edged higher to 49.5. Stepping back, yesterday’s move looks driven by a narrow group of recent market leaders. At the same the broader economic picture remains relatively stable, suggesting this was more a concentrated pullback than a shift in the overall macro backdrop.

Bloomberg as at 10/06/2026.

Please continue to check our blog content for advice, planning issues and the latest investment market and economic updates from leading investment houses.

Charlotte Clarke

24/06/2026

Please see below an article from Brewin Dolphin on Sir Keir Starmer’s resignation and what it could mean for investors, received today 23/06/2026.

Key highlights

• Continuity in government: Sir Keir Starmer remains caretaker prime minister until a successor is chosen, preserving governmental continuity and limiting immediate market disruption.
• Fiscal stability holds, for now: Rachel Reeves is expected to remain as chancellor, at least in the short term. Continuity of the UK’s fiscal framework matters more to investors than Labour’s choice of new leader.
• The bigger picture: Gilt markets may take more direction from the Strait of Hormuz reopening than from Westminster – a reminder that global forces, not politics, drive portfolios.

The political backdrop

Sir Keir Starmer has announced his resignation as prime minister but will remain in post as caretaker until the Labour Party elects a new leader.

Andy Burnham, the former Mayor of Greater Manchester, appears to be the frontrunner, and with Wes Streeting having indicated he will not stand against him, there’s a growing possibility of what could be termed a “coronation:” a swift, largely uncontested transition. That said, Labour leadership contests have surprised before, and until nominations close, nothing is certain.

The timetable is clear: nominations close in mid-July, with a new leader in place before Parliament returns in September. This is obviously a political event, but it’s one that can have economic consequences.

The chancellor and fiscal stability

Much of what matters for markets will depend on who the new prime minister’s Chancellor of the Exchequer is. It’s understood that Burnham is actively considering retaining Rachel Reeves. His choice matters: the chancellor controls the UK’s fiscal framework, and markets need to believe they will make responsible decisions on spending, borrowing and taxation.

Despite successive economic shocks, the current fiscal framework has established a broadly stable trajectory for public finances, underpinned by fiscal rules designed to keep borrowing on a sustainable path. That framework matters more to the nation’s creditors than the identity of the prime minister.

The framework is not without its tensions, though. The UK’s fiscal plan assumes no major economic shocks – an assumption that recent years have repeatedly exposed as optimistic. It also assumes that taxes will rise as a share of national income as the UK approaches the next election, which is a politically bold position for any government to sustain. Policymakers are, in all likelihood, quietly hoping that the economy performs somewhat better than official projections suggest, creating a little more room for manoeuvre than the numbers currently imply.

The new political leadership will earn the market’s trust by respecting the judgements of the Office for Budget Responsibility (OBR) and the Bank of England (BoE). The country’s robust, independent institutions have become genuine anchors of market confidence. Governments that have attempted to sideline or override those bodies – most memorably in the autumn of 2022 – were swiftly reminded of their importance by the bond market’s reaction. Any future leader, from any wing of any party, will face the same institutional constraints.

The short term: What to watch

Markets have remained broadly calm following the prime minister’s announcement, though sentiment could be tested by pledges made during any leadership contest. Currency markets are sensitive to political headlines, and would be weakened by candidates over promising.

Similarly, gilt yields – the interest rates the UK government pays to borrow money – will be closely watched for any signal that an incoming leader intends to shift fiscal policy. It’s worth noting, however, that other global factors may well dominate the picture.

The gradual reopening of the Strait of Hormuz – the critical waterway through which a significant share of the world’s energy supply flows – is a meaningful development for the UK’s economic outlook. A sustained reopening would ease pressure on energy costs, help the inflation picture and negate the need for costly subsidies on fuel bills like those during 2022. However, the reopening is fragile: it’s slow, could go into reverse, and even a fully reopened Strait is unlikely to handle pre-disruption volumes in the near term. The direction of travel there may well matter more to gilt markets over the coming weeks than anything emerging from Westminster.

Good returns from UK equities are driven by companies, not governments. A change of Labour leader is unlikely to alter that dynamic significantly in either direction.

The single most important variable in the short term is the speed and clarity of the Labour leadership process. If Burnham does emerge effectively unopposed, the uncertainty window closes quickly. A prolonged or fractious contest would extend it.

The longer view

It’s worth stepping back and placing this moment in its proper context.

The UK’s underlying economic fundamentals – the trajectory of interest rates, the path of inflation, employment levels and consumer demand – are shaped by forces that are largely independent of who occupies Downing Street. The BoE sets monetary policy according to its inflation mandate, not the political calendar. Most of the challenges facing the UK economy will confront any political leadership in broadly the same way.

For investors with diversified portfolios, UK political noise is one input among many. Developments in the U.S., Europe, and Asia carry equal or greater weight in determining overall portfolio performance.

Moments of short-term volatility have, historically, created selective opportunities for patient, well-positioned investors. The discipline to hold course – or to act thoughtfully rather than reactively – has consistently been rewarded over time. The relatively high bond yields available over recent months have been attractive investments for many investors.

What this means for you

Political transitions rarely reshape economic fundamentals and this one, with a clear timetable, a caretaker government in place, and fiscal continuity signalled, is unlikely to prove an exception.

We’re here to support you through any questions and concerns. Please don’t hesitate to get in touch.

What we’re watching

• The Labour leadership timeline: Whether Andy Burnham does emerge effectively unopposed, and how quickly a new leader is confirmed.
• Gilt yields and sterling: The clearest market signals of how investors are reading the transition.
• Rachel Reeves’ position: Confirmation of whether she remains as chancellor would be the single most reassuring signal for fiscal continuity.
• The Strait of Hormuz: The pace and durability of its reopening may prove more consequential for UK markets than the leadership contest itself.

Please continue to check our blog content for advice, planning issues and the latest investment market and economic updates from leading investment houses.

Alexander James Roberts

23/06/2026

Please see the below article from Tatton Investment Management discussing recent market reactions to the US-Iran ceasefire, lower energy prices, central bank policy and Big Tech’s growing AI-related debt demands, received this morning – 22/06/2026.

From Wars to Warsh

The US-Iran deal extending the ceasefire and reopening the Strait of Hormuz buoyed markets last week. Oil prices fell, global stocks rose and long-term bond yields settled. The Israel-Hezbollah exchange reminds us that the deal is fragile but, for markets, the most damaging risks receded.

Attention shifted to Kevin Warsh’s debut as Federal Reserve Chair. Trump picked him expecting lower rates — but it’s now clear that Warsh’s balance sheet reduction plan takes priority. His goal of weaning markets off central bank liquidity and pushing money creation onto banks is reasonable, but it’s already weighing on riskier assets.

The Fed’s surprisingly hawkish suggestion that rates could go up this year pushed up short-term yields and hurt small and mid-caps. Stable real yields and a stronger dollar tell us that markets think Warsh’s ‘hard money’ approach is off to a good start. That puts the dollar on a much firmer footing, which matters for investors; dollar weakness has detracted from strong US equity returns in the last 18 months.

The Bank of England held rates steady, grateful for the Iran deal’s deflationary effect on energy. UK inflation came in at 2.8% — lower than expected — and gilts had a strong week. Andy Burnham’s byelection win nudged yields briefly, but global pressured had already eased enough to overshadow domestic politics. We’ve long argued that gilts’ sensitivity is about structural imbalance rather than politics, so we expect that global factors will remain more important. With lower energy prices, whoever enters Downing Street next might find more fiscal headroom than expected.

China’s renminbi held firm for most of the weak but its stocks still underperformed. Beijing’s strong renminbi policy has tightened liquidity, but they look ready to ease. A softer renminbi could follow, boosting Chinese equities.

With quarter-end approaching, expect some rebalancing as fund managers trim strong performing equities. Many therefore expect markets to take a breather in the second half of 2026.

Shakeout for oil traders

The US-Iran deal to reopen the Strait of Hormuz has sent Brent crude tumbling below $80 per barrel last week — down sharply from nearly $100pb just weeks ago.

It’s not the first time markets have declared the war over, and the strikes between Israel and Hezbollah remind us that political obstacles to the deal remain. But a reopened Strait looks more likely than at any point since the war started.

Futures pricing shows oil markets quickly improving, but with lingering supply problems. There was an oversupply in global oil before the war, and the underlying balance hasn’t changed (especially after Qatar’s OPEC exit). Oil never hit the predicted $150pb during the conflict, in part because of a sharp fall in Chinese imports. Those will likely rebound, offsetting some of the normalisation in supply.

European natural gas prices have fallen too, though not to pre-war levels. The timing couldn’t be better: storage was running low heading into summer, and another few months of disruption could have caused real problems come winter. Like oil, gas was in oversupply before the war, and that long-term balance hasn’t changed. A sustained US-Iran truce would be great news for Europe. It would also benefit emerging markets – whose assets and currencies, unsurprisingly, fared well last week.

Speculative trading in energy markets shot up during the war, increasing volatility. Intercontinental Exchange reported record ‘open interest’ in energy futures a few weeks ago. Hedge funds were interested in energy futures even before the war – noticing the disconnect between energy prices and metals prices. They were handsomely rewarded, and are now closing out positiong. Fewer speculative traders typically means lower energy prices — and, crucially, less volatility.

The shakeout of speculative investors should mean a return to normal in energy markets.

Big Debt for Big Tech

Big tech’s capital appetite keeps growing. JPMorgan now project $4.1 trillion of debt issuance tied to the AI buildout by 2030, with $300 billion already raised in 2026 alone. Investors have focussed on the wave of equity issuance this year – following SpaceX’s IPO – but the so-called hyperscalers still fund the bulk of their AI capex through borrowing. Their stellar credit ratings make that the cheapest option.

The relevance is that debt is usually funded by money creation, whereas equity issuance is typically funded by selling other assets. Debt issuance is therefore less of a drag on liquidity – though it does increase overall leverage and systemic risk.

That risk isn’t showing up in aggregate corporate credit spreads, mainly because the biggest, safest companies are eating up more of the issuance. Aggregate repayment rates therefore stay low, even though rates have increased across each of the credit rating subgroups.

Liquidity is also boosted by the money-multiplier: hyperscalers’ borrowed billions sit in deposits while they’re waiting to be spent, which amplifies banks’ lending capacity. Money supply is therefore strong even though there’s so much demand for it.

That will change once the hyperscalers start building their planned datacentres (low iron prices suggest they haven’t started yet). Real-economy demand pulls money out of the financial system, slowing the savings flow and tightening liquidity. That’s when AI bubble fears could ramp up.

Those fears might be wrong. Increase real economy spending boosts incomes and growth, potentially offsetting the liquidity tightening with stronger corporate earnings. That’s why investors got excited about AI capex earlier this year.

But the wildcard is the new Fed chair Warsh. His plan to reduce central bank liquidity could come to fruition at the exact moment AI capex drains liquidity from the other side. That could be an inflection point for big tech’s borrowing spree.

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Marcus Blenkinsop

22^nd June 2026

Please see below, an article from EPIC Investment Partners discussing yesterday’s interest rate decision by the Fed and the implications for bond markets. Received today – 19/06/2026

Yesterday’s Daily Update focused on Kevin Warsh’s hawkish debut as Federal Reserve chair. The Fed left rates unchanged at 3.50% to 3.75%, raised its inflation forecasts, signalled a firmer commitment to price stability and offered little forward guidance. The immediate market reaction was straightforward: short-dated Treasury yields rose, the curve flattened and investors priced a higher-for-longer policy environment.

That market reaction was understandable, but it captures only the first part of the story. The more important question is what happens when the central bank becomes less willing to cushion markets with guidance, liquidity and reassurance.

For much of the post-crisis period, the Fed put supported risk-taking. Forward guidance made the policy path feel manageable. Quantitative easing compressed risk premia. Regular communication reduced uncertainty. The result was a lower perceived need for defensive bonds. If equities, high yield and private assets appeared less vulnerable to policy shocks, investors could justify holding more risk and less fixed-income protection.

Warsh’s debut suggests that subsidy is becoming less reliable. A shorter statement, fewer explicit signals and greater emphasis on institutional discretion all point in the same direction. The Fed may still respond to genuine systemic stress. But routine equity weakness, credit spread widening or market discomfort may no longer draw reassurance from Washington.

The point is not that a hawkish Fed is automatically bullish for bonds. It is that a less protective Fed is less supportive for assets priced on confidence, leverage and low volatility. If the Fed put is smaller, investors should require a higher premium to own equities, lower-quality credit and illiquid private assets. The logical response is not more risk. It is more liquidity, contractual income and balance-sheet resilience.

That is where fixed income becomes more important.

High-quality bonds are not risk-free. Less guidance may mean more volatility, particularly at the front end, as investors reassess each data release without the comfort of a clearly signalled policy path. But if weaker risk appetite and tighter financial conditions begin to weigh on growth, demand for duration should rise. The case is not that investors can simply buy bonds ahead of a smooth cutting cycle. It is that high-quality fixed income provides contractual income and liquidity at a time when risk assets have less policy support.

The current energy shock reinforces the argument. Higher oil and fuel prices are inflationary at first, but they are also a tax on consumers. Money spent on petrol, utilities and transport cannot be spent elsewhere. Confidence weakens and discretionary spending slows. If the Fed reacts only to headline inflation, it risks tightening into a slowdown. If it focuses on underlying inflation, credit conditions and real-time demand, it may conclude that policy is already restrictive enough.

That is why the long end of the Treasury market remains important. The case for duration does not rest solely on imminent rate cuts. It rests on the possibility that energy inflation, tighter policy and fading policy reassurance will weaken growth. In that environment, high-quality duration can regain its defensive role even if the front end remains anchored by a more hawkish central bank.

The same logic applies beyond Treasuries. A less predictable Fed changes the dollar, global liquidity conditions and sovereign risk premia. Countries dependent on foreign capital may be more exposed if US policy remains restrictive. Countries with strong external balance sheets, credible institutions and resilient funding positions should be better placed. Bond selection matters more, not less.

Warsh’s first meeting was hawkish. More importantly, it pointed to a Fed less willing to manage market psychology. That is uncomfortable for investors used to monetary hand-holding. But it is also why bonds matter again — not because rate cuts are guaranteed, but because investors may once again need the ballast they provide.

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Alex Kitteringham

19^th September 2026