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Please see the below article from Tatton Investment Management discussing calm equity markets, AI-related earnings, stronger UK growth, yen intervention, and concerns over the sustainability of US margin expansion, received this morning – 17/08/2026.

Hot weather, chilled markets

Equity markets had another decent week, led by US tech stocks and AI-related earnings. Sentiment, more than fundamentals, explains the shift from July’s volatility to August’s calm: markets have stayed liquid through the summer lull, and leveraged retail investors were flushed out during July’s chip-stock sell-off. Worries are still there, in the main because long bond yields are slowly rising and unresponsive to the slow decline in global core inflation.

Two stories drove last week’s AI outperformance. The FT reported that Anthropic is seeking a $2 trillion IPO valuation, likely in October, beating SpaceX’s record. Meanwhile, CoreWeave’s Q2 results beat revenue forecasts, even as losses widened on higher capital spending. CoreWeave shares jumped 19%. Where investors punished the AI hyperscalers for similar spending last month, they now reward it. We think that’s down to improved liquidity, partly from the US-Japan yen intervention, which has lowered volatility and made investors more comfortable holding risk assets.

UK markets didn’t share the optimism, despite stronger-than-expected growth in June and surprisingly strong growth for Q2 of 1.7% (when annualised) which was powered, encouragingly, by business investment. Some commentators dismissed this as a one-off rebound, but we’d note the UK’s data has outpaced its narrative for a while now. Indeed, growth may be too strong, widening the trade deficit. Overall, though, the news is positive – activity looks reasonably well supported. 2026 is on course to exceed growth of 1.5% despite the extreme heat probably having shaved a few tenths of a percentage point from the total.

Risks remain despite the good mood. The IEA raised its 2026 oil shortfall estimate this week. Markets have grown numb to such warnings, but the underlying situation hasn’t gone away. Numbness cuts both ways: it could also blunt any relief rally if oil supplies improved. The next real test is Jackson Hole later this month, where new Fed Chair Kevin Warsh may signal how he plans to wean markets off central bank liquidity. Given that liquidity is currently buoying investor sentiment, his comments will matter a great deal.

Do currency interventions work?

August’s yen intervention was historic – the first joint US-Japan effort to support the currency in nearly 30 years, forced by the yen’s persistent slide against the dollar. The yen has already unwound some of its gains, so we’ve been looking at past interventions to gauge how long this one might last.

Currency intervention really only began with the 1971 Nixon shock (currencies weren’t free-floating before) and the IMF has allowed it since to counter “disorderly conditions”. The US, unhappy with its trade deficit against G5 nations, struck the 1985 Plaza Accord to weaken the dollar. The plan worked so well that the 1987 Louvre Accord was needed to stop the dollar’s slide, but Louvre couldn’t stop the yen’s rise.

Investors didn’t believe the Bank of Japan could control exchange rates, so piled into Japanese bonds, compressing yields and eventually inflating Japan’s equity bubble, whose collapse triggered Japan’s Lost Decades. It’s a reminder that standing in the way of structural imbalances is exceptionally hard, and can bring serious unintended consequences.

The problem now is yen weakness. Japan’s record current account surplus makes the currency look cheap, but investors won’t buy it, partly because Japanese holders of foreign assets prefer to reinvest abroad rather than repatriate their income. For the intervention to mark a turning point, Japanese investors need to start buying yen-denominated assets. Strong Japanese equities and more attractive bond yields should help, though only if yields elsewhere stop looking better.

The US, meanwhile, wants a weaker dollar over the long term, but Japan’s experience shows intervention cannot beat investor demand. We suspect this month’s action was more uncoordinated skin-saving than strategy – though the scale of the imbalance means it could yet force more coordinated policy, and perhaps a new Plaza Accord, in the weeks ahead.

Beware US margin expansion

US earnings growth looks strong, but the composition of that growth matters too. S&P 500 companies are expected to post around 24% earnings growth in 2026, yet only 9.6 percentage points of that comes from revenue growth. The rest is margin expansion and, as an AllianceBernstein research paper argued last month, margin growth is a less sustainable profit driver than rising sales.

Higher revenues reflect genuine demand and grow the overall pie; margin gains take a larger slice of the pie. They often stem from efficiencies or one-off benefits that are harder to repeat, and history shows strong margin growth tends to be followed by compression. Revenue growth itself boosts margins, and index-level margin growth can sometimes just result from share price gains for the higher-margin companies. But neither of those factors fully explain what’s happening now: broad-based margin expansion at the operating level too.

It might sound odd to complain about profitable companies. Corporate efficiency has long underpinned US outperformance – and we’ve argued that margin expansion is central to Japan’s recent positivity, for example. The difference is that US margins are already historically high and can’t expand indefinitely. High margins attract competition, as we’re already seeing among AI chipmakers, where booming profitability is drawing in new entrants and supply capacity.

There are reasons margins could stay elevated longer than usual, particularly if AI genuinely lifts productivity across the economy – though we’re still waiting for firm evidence of that. Big tech’s enormous AI infrastructure spending, aimed at fending off competitors, also blunts the usual competitive pressure on margins.
But politics are also a constraint. Companies that grow profits by squeezing customers or suppliers attract regulatory and public hostility. Affordability is already a major issue ahead of the US midterms, so unpopular datacentre-driven margin growth looks vulnerable. One way or another, companies cannot keep expanding their profit margins forever.

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Marcus Blenkinsop

17^th August 2026

Please see below the daily update article from Brooks Macdonald, exploring how signs of easing US inflation pressures supported markets. It also highlights the recent decline in oil prices. Received on – 14/08/2026.

What has happened?

Investors continued to scale back expectations of a near-term Federal Reserve rate hike, helping the S&P 500 (+0.65%) reach fresh highs. The main catalyst was a softer-than-expected US producer price inflation (PPI) report, which reinforced the message from Wednesday’s CPI release that inflationary pressures may be easing. By the close, markets were pricing just a 35% chance of a Fed rate hike in September, down from more than 50% before the latest inflation data. European markets were less buoyant, however, with the STOXX 600 (-0.04%) slipping for a second consecutive day. This partly reflected Europe’s lower exposure to technology stocks and the fact that expectations for the European Central Bank remained largely unchanged, with investors still assigning a roughly 90% probability to a September rate increase.

Softer PPI print calms rate hike fears

Yesterday’s PPI report strengthened the view that the Fed may not need to tighten policy as aggressively as previously feared. Headline producer prices were unchanged in July, compared with expectations for a 0.2% increase, while annual PPI slowed to 4.7% from the expected 4.9%. The data suggested that the recent energy-driven inflation shock may be losing momentum, providing reassurance that inflation is moving in the right direction. Markets responded quickly, with September rate hike expectations falling immediately after the release.

Oil retreats as geopolitical premium eases

The dovish momentum received further support from lower oil prices, with Brent crude falling -2.15% to $87.07/bbl and snapping a six-day winning streak. Prices recovered from their intraday lows after reports that the Houthis were targeting an Aramco refinery in Saudi Arabia’s Jizan region, while Iranian officials reiterated threats around shipping through the Strait of Hormuz. Nevertheless, in the absence of any material escalation, markets unwound some of the geopolitical risk premium that had built up over the previous week, particularly given continued shipping activity through the region despite the tensions.

What does Brooks Macdonald think?

The market reaction over the past two days highlights how sensitive investors remain to inflation data and the implications for central bank policy. The latest CPI and PPI releases have provided reassurance that inflationary pressures may be easing, helping to reduce concerns about an imminent Fed rate hike. Investors remain cautious about removing the possibility of further tightening altogether, however, as both the August employment report and another CPI release are still due before the next Fed meeting.

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

14/08/2026

Please see below the daily update article from Brooks Macdonald, received this morning – 13/08/2026:

What has happened?

Markets took a modestly positive view of July’s US inflation data, with easing concerns about another near-term Federal Reserve rate hike helping risk assets gain ground. Headline and core inflation both came in as expected, and following last Friday’s softer employment report, investors saw less urgency for the Fed to tighten policy again in September. Shorter-dated Treasury yields edged lower, while continued strength in semiconductor stocks helped push the S&P 500 (+0.26%) to within a sliver of its record high. The equal-weighted S&P 500 (+0.16%) also reached a fresh high, pointing to broader market participation. The Philadelphia Semiconductor Index rising +2.49%. Gains have been supported by strong demand for AI infrastructure, with CoreWeave (+19.28%) and Super Micro (+19.02%) surging after delivering upbeat outlooks earlier in the week.

Inflation cools but not all price pressures have disappeared

The CPI report largely reinforced the narrative of gradual disinflation. Headline prices rose 0.1% month-on-month and 3.4% year-on-year in July, while core inflation increased by 0.2% on the month and 2.5% on the year, matching its slowest annual pace since March 2021. There were several encouraging details beneath the headline figures. Energy and gasoline prices fell for a second consecutive month, grocery prices declined for the first time since March, and so-called “supercore” inflation remained relatively subdued. However, the report was not entirely free of inflationary signals. Core goods prices recorded their strongest monthly increase since last September, driven in part by sharp rises in computer software and accessories prices. With memory chips increasingly being directed towards data-centre demand, it is a reminder that the AI investment boom may be creating pockets of pricing pressure within parts of the consumer technology supply chain.

What does Brooks Macdonald think?

The market response suggests investors viewed the CPI report as supportive, but not decisive. Expectations for a September Fed rate hike eased modestly, yet the overall repricing was relatively limited. This nuance was reflected across asset markets. While shorter-dated Treasury yields fell, longer-dated yields were little changed. Meanwhile, oil remained close to $90/bbl, and European gas prices moved higher as hopes for a swift US-Iran agreement continued to fade. Taken together, inflation concerns may be easing, but risks linked to energy prices and geopolitics have not disappeared. Attention now turns to today’s US producer price inflation (PPI) report. Beyond the headline figure, investors will be paying close attention to categories such as healthcare services, airfares and portfolio management, which feed into the Fed’s preferred inflation measure, core PCE. With investors still divided on whether another Fed rate increase will be needed this year, each inflation release has taken on greater significance.

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

Cameron Owen

13/08/2026

Please see this week’s Markets in a Minute update below from Brewin Dolphin, received yesterday afternoon – 11/08/2026.

AI stocks rebound from sharp downturn

AI stocks took a sharp downturn in July after a strong Q2. While performance has rebounded, some investor caution remains.

Key highlights

• Gulf de-escalation: Oil fell from a high of $100 per barrel to below $80 per barrel amid reports of a possible agreement to reopen the Strait of Hormuz.
• AI equity volatility: July saw a rotation out of AI infrastructure stocks, driven by efficiency gains in open-weight models and a forced hedge fund unwind.
• U.S. labour market: Jobs data pointed to broad stability, but the July payrolls report showed a surprise decline of 23,000 jobs, keeping interest rate decisions finely balanced.

Gulf tensions ease – oil retreats

Markets opened the week by responding to reports of a possible de-escalation in the Persian Gulf.

Source: LSEG Datastream

Oil fell from a July high of $100 per barrel to below $80 per barrel – a striking move given the collapse of the previous U.S.-Iran ceasefire. A new agreement to reopen the Strait of Hormuz appears to be in preparation, which would entail inbound shipping via Iran, outbound shipping via Oman, both sides clearing mines and no tolls charged. President Donald Trump sounded constructive, while retaining the threat of military action.

Since the onset of the conflict, crude prices have remained lower than analysts would have expected given the scale of supply disruption, and they have tended to fall on any sign of de-escalation. Barriers to a full reopening of the Strait remain high, with Iran appearing to have demonstrated that it can wield influence over the waterway at will.

For portfolios, the practical implication is familiar: energy prices feed through to inflation, central bank thinking, and the cost of everything from a refinery run to an airline ticket. It’s best to avoid getting whipsawed by headlines that change by the day.

AI stocks and shifting sentiment

Alongside the Gulf, AI remained the dominant concern for equity markets.

July saw a sharp rotation out of the AI spending beneficiaries – the companies that sell the equipment used by the AI ecosystem. Bottlenecks in the supply of specific components, most notably high-bandwidth memory (a specialist chip used in AI servers), drove a substantial rally from March to June while July brought a sharp reversal.

The sell-off reflected several factors. Open-weight models (AI systems whose underlying code is publicly available) have been making significant advances in efficiency, suggesting that less server capacity may be required to run them. Hyperscalers – the large cloud providers driving the bulk of investment – have also depleted their free cashflow and may face funding constraints. A significant factor, however, appears to have been a single hedge fund forced to unwind well-known leveraged positions; once the situation resolved, the stocks rallied, though some nervousness persists.

SpaceX captured the market’s conflicting mood. Results beat on earnings and revenue, but were overshadowed by a sharp rise in AI-related capital spending. The stock fell 7% after hours (having gained 9% during the previous session).

Real economy signals a mixed picture

The week brought a range of U.S. jobs data, with stability the best overall description. There was little change in job openings, resignations and layoffs, and jobless claims nearly reached an all-time low. Purchasing managers’ surveys (which track activity across manufacturing and services) showed employment increasing modestly alongside a broad improvement in economic activity across regions and sectors.

It’s notable that the U.S. no longer stands out as the sole beacon of growth. European economic surprises have exceeded those of the U.S. recently, and the stock market is no longer being driven by a narrow group of AI-related stocks, having seen much broader participation recently.

Source: LSEG Datastream

The synchronicity of that improvement should be enough to shift the window of anxiety from growth towards inflation. However, at a time when numerous sources seem to be showing an improving employment picture, the July employment report from the Bureau of Labor Statistics showed a surprise decline of 23,000 jobs. This fell far short of forecasts, which had predicted an increase of up to 80,000 new jobs. Wage and pay growth also slowed.

This may confuse the outlook for the U.S. jobs market, but it should be reassuring for investors, as many have been concerned about the potential need for interest rates to rise. An increase in September was hanging in the balance, but this seems a bit less likely now.

Source: LSEG Datastream

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

12/08/2026

Please see below the daily update article from Brooks Macdonald, received this morning – 11/08/2026:

What has happened?

Markets struggled to build on last week’s gains as higher oil prices weighed on risk appetite and pushed bond yields higher. The S&P 500 (-0.06%) and NASDAQ (-0.32%) both edged lower, although strength in energy stocks (+4.63%) helped limit broader declines. Semiconductor shares led the weakness, with the Philadelphia Semiconductor Index falling -2.94% after its strong rebound last week. Intel (-4.06%) announced plans for a $15bn share offering, while Nvidia (-2.86%) unveiled a partnership with several investment firms aimed at mobilising up to $500bn of financing for customers deploying its technology. In Europe, the STOXX 600 (+0.03%) closed at a record high for a sixth straight gain, while the FTSE 100 (-0.35%) underperformed.

Rising oil prices test market optimism

There was no breakthrough in efforts to reopen the Strait of Hormuz, with US-Iran rhetoric continuing to harden and reducing hopes of a near-term resolution. Brent crude rose almost 5% to $87.72/bbl, its fourth consecutive gain. The rise in oil prices reignited inflation concerns and prompted markets to modestly increase expectations for further rate hikes in both the US and Europe. That backdrop weighed on government bonds, with the US 10-year Treasury yield rising to 4.71% and European sovereign yields also moving closer to their late-July highs. Investors remain alert to the risk that sustained energy price pressures could complicate the inflation outlook and slow progress towards central bank targets.

What does Brooks Macdonald think?

Risk sentiment has remained surprisingly resilient so far this month. For the past two years, early August has often been associated with bouts of market volatility, but this year equities have continued to trade near record highs despite rising oil prices and renewed geopolitical uncertainty. Strong corporate earnings and continued enthusiasm around artificial intelligence have helped support markets, although the situation in Iran remains an important risk. For now, investors appear willing to look through the uncertainty, but further deterioration could quickly bring inflation concerns and energy prices back into sharper focus.

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

11/08/2026

Please see the below article from Tatton Investment Management which explores the factors shaping investor confidence, from geopolitical developments and currency intervention to liquidity, bond yields and the strength of US corporate earnings, received this morning – 10/08/2026.

Regaining confidence after July’s drought

Stocks and bond prices are heading higher as the week starts, with US employment data showing enough softness to reduce inflation pressures, diminishing the chances of rate rises.

Another Iran “deal” buoyed markets last week, with Iran and Oman reportedly agreeing a new shipping route through the Strait of Hormuz. This weekend’s Houthi attacks have pushed oil back up somewhat, but the signs of Iran’s willingness to seek a truce should continue to ease the pressure. The Strait is, in Trump’s words, ‘sort of open’. But with each new back and forth, the market impacts dampen.

If the Iran news was more of the same, the US and Japan’s joint intervention to support the yen was a new dawn. It’s the first such coordination in nearly 30 years and feels reminiscent of the 1985 Plaza Accord.

For Japan, it points to higher interest rates ahead. Japan has high inflation, strong growth and a large current account surplus. It’s unlikely the US would step in without some understanding that the BoJ will address those. It could also encourage Japanese investors to bring capital home, boosting the yen further.

The yen-tervention is also a decent chunk of dollar and euro liquidity injected into global markets – though we should be wary of further currency volatility.

Liquidity is improving and corporate earnings are strong, easing equity valuations even as prices rise. The catch is real bond yields, still at their highest since the turn of the century, which make equities look less cheap by comparison. We doubt this reflects bond markets’ growth optimism; more likely, intense capital demand from governments and AI companies is outpacing bond supply.

The risk is high yields luring investors out of stocks, but that’s not our base case. With improving liquidity, falling volatility and a rebuilding of ‘long’ positions (following July’s shakeout), the good mood should last all summer. Let’s hope it’s a long one.

July asset returns review

July was a difficult month for global investors, as stocks and bonds sold off together while volatility rose sharply. Global equities lost 1.3% in sterling terms and bond prices fell 1%, as yields rose. The disintegration of the US-Iran ceasefire dominated the first half of the month. Brent crude peaked above $100 a barrel before falling back, but still finished 18.9% higher in sterling terms, with broader commodities up 11%.

Equities had other problems too. Investors doubted the sustainability of AI-related earnings growth – despite a strong reporting season – and grew anxious about AI infrastructure spending. Previously buoyant chip manufacturers were hit hardest. Large US tech stocks fell 4.5% in sterling terms and the S&P 500 fell 1.4%. Emerging markets dropped 4.4%, dragged down by TSMC, Samsung and SK Hynix, even though China, the biggest EM region, outperformed every other major market with a 5.5% gain.

A fall in growth stocks should be good for bondholders, as bond yields should track growth expectations, but that didn’t hold. Long-term yields spiked, first on energy prices and then after a poorly received press conference from Federal Reserve Chair Kevin Warsh. Long-term real yields reached around 3.5%, the highest in over 20 years. We suspect the bond-equity disconnect comes from buyers in each asset class becoming entrenched, with risk premia rising in both. UK gilts were the most sensitive, as usual – a structural feature more than an opinion on Andy Burnham’s spending plans.

In contrast, UK stocks were among the best performers, gaining 3.6%, thanks to energy companies and minimal tech presence. European stocks slid 0.8% and Japanese stocks 0.4%. On the last day of the month, coordinated intervention to support the yen injected substantial dollar and euro liquidity – a potent remedy for July’s volatility. Sure enough, markets have looked more positive in early August.

US earnings flatter to deceive

US company earnings look phenomenal: S&P 500 firms have just reported 47.4% year-on-year growth for the second quarter, the strongest since the post-Covid rebound in 2021. Looking closer, though, shows those numbers are a little artificial.

The bulk of that growth came from the ‘Magnificent Seven’ tech firms, but not from revenue or margins. Under US accounting rules, shareholdings in other companies must be marked to fair value, so gains for those shares show up as profit even if those gains aren’t crystallised. Amazon, Alphabet and Microsoft are all major private shareholders in Anthropic and OpenAI, and their stakes delivered enormous gains. Amazon alone reported a $53.4bn pre-tax gain, mostly from Anthropic. Alphabet also benefited from its $94.1bn stake in the now-public SpaceX. Those gains cover the period till the end of June – since which time SpaceX’s shares have fallen substantially.

These results feed the ‘circular financing’ narrative that led to AI bubble talk earlier this year: AI earnings rising because AI share prices are rising.

Even so, the underlying earnings are strong. Strip out Alphabet and Amazon’s investment gains, and S&P 500 earnings still grew 29% – below the headline figure, but well above the 24% analysts had expected, and still the best quarter since 2021. Growth was also more broadly spread across sectors than the headlines suggest.

Not every distortion flatters earnings either: Intel’s government stake sits on its balance sheet as a liability, so a rising share price actually weakens its reported earnings.

We think markets are reading this sensibly. AI-related shares are still below their May levels, so valuations have got cheaper even as earnings power ahead. That is hardly bubble behaviour. And last week’s tech rally owed more to solid earnings, falling oil prices and central bank intervention supporting the yen than to misplaced earnings excitement. Investors seem healthily sceptical of AI valuations, yet unable to ignore that underlying earnings remain genuinely strong.

Important Information This material has been written by Tatton Investment Management and is for information purposes only and must not be considered as financial advice. We always recommend that investors seek financial advice before making any financial decisions. The value of investments can go down as well as up, and investors may get back less than originally invested. All calls to and from our landlines and mobiles are recorded to meet regulatory requirements.

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Andrew Lloyd

10^th August 2026

Please see an investment outlook update below from Evelyn Partners, received this afternoon – 06/08/2026.

The US growth story is far from over

They say life begins at 40. For the US, it may begin at 250. As the US celebrated the 250th anniversary of its founding in July, the milestone offers an opportunity to reflect on whether the country’s strongest years may still lie ahead. Indeed, relative to many of the world’s oldest countries, the US remains surprisingly young. For instance, Japan traces its origins back more than 2,600 years, France more than 1,180 years, Spain more than 530 years, and the Netherlands nearly 450 years.

Despite its relatively short history, the US has established itself as the dominant force in the global economy and financial markets. Its large and dynamic domestic economy has provided a powerful foundation for sustained growth. Importantly, this economic success has been accompanied by a marked rise in real gross domestic product (GDP) per capita, indicating that the gains from expansion have increasingly translated into higher living standards than those achieved in many European peers. This combination of economic scale, innovation, and rising prosperity has helped underpin the economy’s long-term resilience.

More importantly for investors today, there are few signs that the US economy is running out of road. The latest July economic forecasts from the IMF show that US real GDP is expected to expand by an average of around 2.3% for 2026 and 2027, compared to roughly 1.2% for the UK, 1.0% for the Eurozone and 0.7% for Japan for the same period.¹ In other words, the US is expected to continue outpacing many of its developed-market peers, reinforcing the view that its growth story is far from over.

Getting to grips with US long-term economic success

A combination of political stability, strong property rights, and the rule of law have provided a durable foundation for investment and entrepreneurship. Indeed, the US Constitution, ratified in 1788, remains the world’s oldest written national constitution still in force.

Building on this institutional foundation, the US has benefited from a remarkable capacity for innovation. The country invests around 3.5% of GDP in research and development, above the OECD average of 2.9%, helping to drive technological progress and productivity growth. Deep capital markets adds another layer of support for growth and a business culture that embraces risk-taking and rewards success.

Geography has also played a crucial role. The US possesses abundant farmland, extensive inland waterways, access to both the Atlantic and Pacific Oceans, and vast energy resources. Today, it is the world’s largest producer of oil and natural gas. Apart from the attack on Pearl Harbor in 1941 and the terrorist attacks of 2001, its location has provided a degree of insulation from external threats, helping to support economic expansion compared with countries that experienced the devastating effects of two world wars on home soil.

Yet natural advantages alone do not explain America’s sustained success. Its large domestic market has enabled businesses to achieve scale quickly and efficiently. Furthermore, the US dollar’s status as the world’s leading reserve currency has enabled the country to run sizeable budget deficits, supported in part by continued foreign demand for US assets.

Taken together, these advantages help explain why the US has repeatedly adapted to major economic and technological shifts, from industrialisation and the rise of the internet to the development of AI. The result has been a powerful engine of growth, innovation and wealth creation, which has translated into strong long-term returns for investors.

Turning economic expansion into earnings

Economic strength matters for investors only if it ultimately translates into corporate profitability. Since the end of the Global Financial Crisis (GFC) in 2009, the US economy has generally expanded faster than other advanced economies. US GDP has grown from around 50% of the combined GDP of other advanced economies during the GFC to approximately 80% today.³ Over the same period, earnings per share (EPS) growth for US companies has beaten that of their peers in other MSCI indices by around 6 percentage points per year.

Superior economic growth does not always translate into stronger relative earnings growth in the short term. While US EPS is expected to grow by a still robust 24% in 2026, it trails the 33% growth forecast for companies in the MSCI All Country World Index ex-US. However, earnings expansion has been a key driver of US equity market outperformance relative to other developed markets over the long term. According to analyst consensus forecasts, US companies are once again expected to deliver faster EPS growth than other regions in 2027 and 2028.

Balancing US fundamentals with interest rates and market risks

Strong long-term fundamentals do not eliminate shorter-term risks. While the long-term outlook for the US economy remains compelling, investors must weigh these strengths against shorter-term risks. For instance, policy risk from the White House has increased, with President Trump’s shifting positions on Iran and trade tariffs contributing to market uncertainty. Concerns about potential political interference in the Federal Reserve’s (Fed) decision-making have also raised questions regarding the future independence of monetary policy.

Reflecting these issues, investors may need to adjust towards a “higher-for-longer” interest rate outlook, with resilient US economic growth and sticky inflation reducing the likelihood of near-term Fed interest rate cuts. Higher rates may weigh on equity valuations, particularly in the technology and communication services sectors that dominate US markets. Tighter financial conditions have been a slight headwind for US equities this year.

None of this fundamentally weakens the long-term investment case for the US. Rather, it highlights the distinction between attractive structural fundamentals and shorter-term market risks. While the US remains the global leader in innovation, productivity and earnings growth, investors may face periods of volatility as markets adjust to changing interest-rate expectations, geopolitical developments and policy uncertainty.

Opportunities outside the US

A positive outlook for the US need not imply a US-only investment strategy. Given some of the risks associated with the US, investors may wish to look further afield for opportunities. At the same time, strong US growth, and particularly investment linked to AI, continues to create opportunities beyond its borders. As discussed in last month’s Investment Outlook (Investors and firms just can’t get enough of AI), massive spending on artificial intelligence is driving a sharp rise in the market valuations of technology companies globally.

This is becoming particularly evident in Asia, where semiconductor manufacturers have emerged as some of the world’s most valuable companies. TSMC, Samsung and SK Hynix now account for roughly 30% of the Emerging Markets (EM) index. These firms have become central to the rollout of AI data centres, creating strong demand for semiconductors and driving rapid earnings growth. As a result, consensus forecasts suggest EM EPS will grow by 62% in 2026 and 24% in 2027, the fastest rates among the major regions, before moderating to 10% in 2028.⁷ This improving earnings outlook has helped support EM equities, with the MSCI EM index returning 20% (as at 22 July 2026) and outperforming developed markets so far this year.

Wrapping up

The US economy continues to benefit from many of the same strengths that have supported its success over the past 250 years: innovation, strong institutions, deep capital markets and an ability to adapt to change. These advantages continue to underpin earnings growth and help explain why US markets remain so important to global investors, while also creating opportunities in Asia.

If life truly begins at 250, the US may still be in the early chapters of a remarkably successful economic journey. For investors, however, the opportunity is not simply to follow that story, but to identify the winners emerging across all the markets and industries it helps shape.

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

06/08/2026

Please see below the daily update article from Brooks Macdonald, received this morning – 05/08/2026:

What has happened?

Markets rallied as easing concerns over the Strait of Hormuz pushed oil prices and inflation expectations lower, supporting both equities and bonds. Brent crude fell back below $80/bbl. Short-term inflation expectations dropped to multi-month lows, bond yields continued to retreat, and both the S&P 500 (+1.79%) and Stoxx 600 (+0.73%) reached fresh record highs. Risk appetite also returned to the AI theme after July’s volatility, with technology stocks leading gains. The Nasdaq rose +2.59%, while the Philadelphia Semiconductor Index surged +6.55%, its strongest daily gain since March and extending its advance since last Wednesday to +16.58%, the largest four-day rise since 2020.

Strait of Hormuz fears continue to fade

Much of the market optimism reflected further signs of progress around the Strait of Hormuz. Qatar confirmed that a draft proposal had been circulated, while Treasury Secretary Bessent suggested an agreement to restore shipping flows could be reached soon. Reports from Axios and the Wall Street Journal indicated that the US is pursuing a 60-day interim arrangement between Iran and Oman to ease vessel transit through the region. While the longer-term framework remains unclear, investors responded by further unwinding geopolitical risk premiums.

Confidence returns to the AI investment cycle

Investor sentiment was also supported by developments that reinforced confidence in AI-related spending. Palantir (+29.45%) issued a strong outlook, reports emerged that Anthropic had agreed a $10bn computing infrastructure deal, and Caterpillar (+5.60%) raised sales guidance while pushing back against concerns that data-centre investment was slowing. Reuters also reported that US regulators are considering restrictions on imports of Chinese optical transceivers, a key component in data-centre networks. The news boosted domestic suppliers such as Marvell (+12.81%) and Coherent (+12.35%), underscoring how AI supply chains are becoming increasingly intertwined with US-China strategic competition. Some of the enthusiasm faded after the close, however, as SpaceX and AMD shares declined in extended trading following earnings updates.

What does Brooks Macdonald think?

Importantly, the rally in government bonds does not appear to be signalling a meaningful deterioration in growth. While June JOLTS job openings eased to 7.36 million from 7.54 million previously, the broader details remained constructive, with hiring improving, layoffs subdued and the quits rate holding at a healthy 2.0%. Taken together, the recent data suggest markets are reassessing inflation risks more than growth risks. As geopolitical concerns ease and energy prices retreat, investors have become more willing to look through recent volatility and refocus on the underlying earnings and investment backdrop. That has created a supportive environment for both bonds and equities.

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

05/08/2026

Please see below the daily update article from Brooks Macdonald, received this morning – 04/08/2026:

What has happened?

The combination of lower oil prices and stronger economic data provided a supportive backdrop for risk assets. The S&P 500 rose +1.48% to finish just below its June record high, while the Nasdaq Composite gained +2.13%. Large-cap technology led the advance, with the Magnificent Seven rallying +3.56%. Together with last week’s rebound, the group delivered its best three-day run (+8.98%) since the US-China trade truce in May 2025. Europe also participated in the rally, with the Stoxx 600 up +0.45%. One of the most notable corporate stories came from healthcare, where AstraZeneca fell -8.96% following reports that it had explored a potential acquisition of Bristol-Myers Squibb, a deal that would rank as the largest pharmaceutical transaction on record.

The market gets the best of both worlds

Markets were encouraged by signs that geopolitical tensions and growth concerns may be easing at the same time. Optimism grew after reports of renewed diplomatic engagement between the US and Iran, alongside progress on temporary shipping arrangements through the Strait of Hormuz. At the same time, US economic data surprised positively. The ISM manufacturing index rose to 55.6 in July, its highest level since May 2022 and comfortably above expectations, with employment returning to expansion territory for the first time since September 2023. Survey commentary highlighted strength in semiconductors, artificial intelligence, defence and high-performance computing. The result was a combination investors have seen little of this summer: easing inflation concerns alongside stronger growth signals, helping to support both equity and bond markets.

What does Brooks Macdonald think?

While geopolitical developments helped improve sentiment, the more important takeaway may be that market optimism is still being underpinned by fundamentals. Recent economic data suggest that overall business investment remains healthy. The resilience of corporate earnings and business activity remains an important source of support for risk assets, particularly if growth can continue without a material reacceleration in inflation.

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

Cameron Owen

04/08/2026

Please see the below article from Tatton Investment Management received this morning – 03/08/2026

Learn to make your mind up

We open this week in a positive frame following a week where multi-asset portfolios will have shown either small losses or, more likely, small gains. Diversification proved its worth as bonds, currencies and many high-profile stocks were volatile.

UK equities were a bright spot: the FTSE 100 and the smaller-cap 250 both made new all-time highs, while gilt yields end the week a little lower. Andy Burnham appears to have regained some fiscal credibility, though Capital Economics reckons funding the spending promises implies another £65bn of tax rises – equivalent to Reeves’ first budget move.

The US earnings season is a month old and improving as it goes. Expected Q2 2026 earnings per share growth for the index has risen from 22.3% on 1 July to 27% now. Six of the Magnificent Seven have reported, with Nvidia still to come in the final weeks. Signals on the AI build-out – how the investment is performing, how much more is coming, and who can fund it most cheaply – have been mixed, which is why a previously homogenous group is now showing wide dispersion in share prices. Credit quality remains exceptional, however: the main six sit well above the BBB average rating for corporates generally, leaving considerable room to leverage up before downgrade risk bites. Chip stocks rode the volatility hardest – South Korea’s SK Hynix was down over 25% from the previous week’s close by Wednesday, then rallied more than 35% off that low to finish mathematically unchanged.

Trump has announced of another pause but the Middle East conflict continues to expand rather than resolve, with US missiles hitting Iraqi territory and Ukraine striking Iranian ships in the Caspian Sea. Crude oil prices remain high, but reserves of diesel and other refined products are tight and prices are back at March highs – yet markets have become steadily less sensitive to the news flow.

July’s round of policy meetings ended with no change anywhere. The Bank of England held, with Andrew Bailey striking a dovish tone despite three of nine votes for a rise. The Federal Open Market Committee also held, with three voters seeking a hike and no reference to changing inflation conditions. Kevin Warsh, in his second press conference, was deliberately unhelpful: he declined to shed light on the decision-making process and told markets to make up their own minds. Longer yields rose sharply and the dollar weakened – which we read less as a hawkish signal and more as investors pricing the extra risk of holding long-dated bonds without forward guidance. Jackson Hole on 27-29 August is his opportunity to explain why a little less jawboning is a good thing. What ultimately matters is the Fed’s commitment to the 2% inflation target, not any single policy move.

Growing pains in corporate credit

Corporate credit spreads – the gap between corporate and government bond yields – have widened over recent weeks in both the US and Europe. The move is small and follows a long compression that took spreads to historic lows, but it has been enough to make some investors nervous. Rising spreads are usually associated with weaker growth or recession; we think this move may be something different.

Two things argue against complacency. Higher government bond yields mean total debt costs have risen faster than spreads themselves, and the aggregate figure is skewed by who is borrowing: the biggest, best-rated companies are the ones raising billions for AI infrastructure, and their favourable rates hold the average down even as others pay more. Other signals look more worrying. Credit default swaps on hyperscaler bonds have risen

sharply over the past month, with Oracle hardest hit after S&P Global cut its rating to just above junk. Fitch has also raised its forecast for European loan defaults in 2026, citing “idiosyncratic pressures”.

The unusual feature here is that global growth looks solid – employment is resilient and corporate earnings growth has been strong. AI investment is the driving force, and rapid AI adoption inevitably creates winners and losers. That means more individual defaults even while the aggregate economy is healthy, which is precisely the point Fitch made: greater differentiation between companies, not broad deterioration. Alongside that sits a second story – uncertainty over which AI companies actually come out on top, echoing the recent semiconductor sell-off.

Neither looks systemic today, but either could become so if credit problems tighten financial conditions more broadly. The main risk would be a central bank hike arriving at the same time as spreads widen for unrelated reasons. Kevin Warsh has suggested naturally tighter financial conditions may reduce the need for rate rises, but other Fed officials have sounded more hawkish on the back of strong US growth. For now, wider spreads look like growing pains from AI development rather than the start of a credit crunch.

Who’s afraid of consumer confidence?

US consumer confidence fell again in the Conference Board’s latest survey, extending a long downward trend even as growth data stays strong. The gap between hard data and soft sentiment has become wide enough that many now question whether confidence figures tell us anything at all. We think that is an overreaction: they may not tell us what they used to, but they still tell us something.

There are really two questions – whether the surveys are accurate, and whether consumers genuinely are more pessimistic. Ruchir Sharma, writing in the Financial Times this week, points to falling response rates, political polarisation and social media; Kyla Scanlon’s “vibecession” captures the same idea. The University of Michigan survey has faced particular criticism over its 2024 switch to online-only collection, which some argue increased negative bias and oversampled Democrat voters. Defenders note that online responses correlate well with the old phone data – but as Ryan Cummings and Ernie Tedeschi have pointed out, correlation still allows one series to be materially more skewed than the other.

The debate is mostly American, but the trend is not. French and German consumers have been hit harder than Americans since the pandemic, despite weaker underlying growth in Europe and Japan. A large part of the disconnect is inequality: growth in profits and living standards has been concentrated in the biggest companies and richest households. That is the K-shaped economy, and persistent weakness in consumer confidence is evidence for it – markets began 2026 expecting a rotation away from big tech and AI owners towards more traditional sectors, and confidence data suggests growth is still concentrated at the top.

The broader point is that a correlation breaking down does not make an indicator broken; it means reading it more carefully. The Conference Board survey is more sensitive to job availability, the Michigan survey to the cost of living – which explains their divergence through the post-pandemic inflation period. Interestingly, Michigan has picked up slightly from historic lows while the Conference Board keeps falling, hinting that consumers feel fragile but are less troubled by inflation than headlines suggest. If so, a Federal Reserve rate rise could be what breaks that fragile confidence.

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

03/08/2026