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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Markets delivered resilient first-half returns despite Iran conflict and persistent inflation. AI capital expenditure boom and exceptionally strong earnings growth provide fundamental support, with US earnings forecast at 22% and European at 18% for 2026."
Global equity and bond markets delivered resilient returns in the first half of 2026 despite geopolitical shocks from the Iran conflict and persistent inflation. The outlook is shaped by four key factors: AI-driven capital spending, corporate earnings strength, the Iran conflict, and interest rates. AI investment continues as one of the most powerful capital expenditure booms in history, though hyperscalers increasingly need external financing, raising risks. Second-quarter earnings are expected to be among the strongest in living memory, with US S&P 500 growth forecast at 22% and European earnings at 18% for the year. Strong earnings growth suggests conditions for a sustained downturn are not yet in place. While markets price in interest rate increases due to energy costs and AI-driven inflation, rates may not need to rise if oil prices remain low and tariff effects fade. The UK property market continues to underperform financial assets, with house prices lagging inflation and the forces that fueled the housing boom unlikely to return. Generative AI is transforming media and entertainment, creating licensing opportunities but raising copyright concerns that create uncertainty for intellectual property valuations.
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