Global Markets Between Meetings

The index numbers don’t really do justice to how eventful the period was. The S&P 500 finished at 7,413 against 7,440 at the start, so down less than half a per cent, but during that time it set a record high and then gave it back. The Nasdaq fell 3.4%, while the FTSE 100 rose a little over 2% and closed within touching distance of its February record. That gap between London and New York is one of the stories of the period. Investors have begun to doubt whether the money being spent on artificial intelligence will earn its keep, and the UK market has almost none of that exposure.

Alongside the AI story, the Strait of Hormuz remained an important market narrative. The ceasefire agreed shortly before our last meeting didn’t survive three weeks. Attacks on shipping in the Strait were met with US strikes on more than eighty targets, the ceasefire was declared over, and Iran retaliated against Jordan, Kuwait and Qatar. The naval blockade returned, along with a 20% charge on cargo through the Strait. Then, in the final week of the period, the US paused its strikes, Iran stopped retaliating, and Omani negotiators put forward a plan to get shipping moving again.

Like everyone else in markets, we have no way of knowing whether a lasting ceasefire will be agreed. What we would say is that the pressure to reach one is increasingly domestic. The war has become genuinely unpopular, the latest Reuters/Ipsos poll has 33% of Americans approving compared with 62% disapproving, the worst reading since it began. With midterms in November, and petrol prices the consequence voters see most directly, the administration has growing reason to want this resolved. None of which guarantees anything, and you could have made much the same argument in June.

Oil traced that same pattern of escalation and pause. Brent dropped below $70 in the first few days of July while the ceasefire looked as though it might hold, jumped almost 10% in a single session when the blockade returned, and reached $102 as attacks on Saudi tankers in the Red Sea and drone strikes on Kazakh export infrastructure piled on further disruption. It then fell more than 6% in the last session to settle around $86, leaving it up roughly 17% over the period. A major reason this matters is the inflation story. June’s US figures were much better than expected, with headline inflation falling to 3.5% against a forecast of 3.8%, but that was mostly driven by a 10% fall in petrol prices during a month when oil happened to be cheap. A renewed increase in oil prices will again push inflation back up in the coming months.

You could see where the market’s attention sits from how it handled that inflation print, it simply shrugged. In most years a surprise of that size may have pushed equities higher. Instead, technology stocks continued to fall, and by the end of the period the semiconductor index was down 20% over the month and the S&P technology sector down more than 9%, on course for its worst month since September 2022. SK Hynix, a large Korean chipmaker, fell 15% in its worst day on record, dragging the Korean market down 9% with it, and Nvidia lost 5% in the final session. The worry isn’t new, but it has intensified. Investors are asking whether the sums being spent on AI infrastructure can possibly earn a decent return. Second quarter earnings growth is tracking near 24%, so this isn’t a question about profits today; it’s a question about how long the story holds.

Tariffs were put on a new legal footing for the second time this year. The blanket 10% tariff introduce in February reached its statutory time limit and expired, and was replaced within hours by new duties, after investigations found that sixty economies had failed either to ban or to properly enforce bans on goods made with forced labour. The new rate is 10% for countries that have such a ban in place or have committed to one, and 12.5% for everyone else, covering 99.4% of US imports. These new tariffs caused almost no market reaction, maybe suggested that investors don’t expect them to stick.

Gilts had another uncomfortable period, although this was orderly selling and nothing like the meltdown seen in the autumn of 2022. Andy Burnham became Prime Minister, sacked Rachel Reeves and appointed John Healey Chancellor. He has also begun his programme of devolution of power by opening Number 10 North in Manchester. The 10-year gilt yield went back above 5% after Burnham talked about wanting flexibility within the fiscal rules but has since moved lower as Burnham tried his best to convince markets of his fiscal credibility. The concern for markets isn’t devolution itself, it’s the scale of the fiscal loosening that might come with it, and we won’t know that until the autumn Budget.

We made no changes over the period. Our technology exposure has added a great deal to returns over recent months, but it’s measured rather than concentrated, so the sell-off has been felt without causing real damage. Many other areas of the portfolio have held up well during this period. The inflation protection we put in place in April remains in place. The short-dated index-linked gilts, the addition to gold and the strategic metals position were all implemented for exactly the risk that has since started to show up in the oil price. Having positioned for it, the right course of action as it plays out is to hold.

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IC meeting date 27^th July 2026. The information and commentary contained in this document is based on views as at 30^th July 2026 and may be subject to change.