Market Commentary: 6 August 2026
Stocks Find Support from Strong Earnings
- Stock markets (MSCI World Index) have gained 13% year-to-date.
- Bond markets (Bloomberg Global Aggregate Index) remain flat for the year.
Please note that the content of this review should not be considered as investment advice or any form of recommendation. If you require investment advice, please do not hesitate to get in touch with a member of our qualified team.
Key Themes
Stocks have moved to new highs in recent days, shaking off recent jitters about the conflict in Iran, the inflationary impact of oil price fluctuations and potential overinvestment in Artificial Intelligence (AI) technology. With peace talks back on the agenda, bond yields are moderating again, which should reduce pressure on central banks to hike interest rates. Companies are reporting good profit growth and we remain in bull market conditions.
UK
British stocks have performed well for the second month in a row, buoyed by the energy sector, which gained 18% in July following the re-escalation of the US-Iran conflict. Shell retook its position as the second-largest company in the FTSE 100 Index, with AstraZeneca slipping to third. Shares in the pharmaceutical giant declined 9% on Monday as investors disliked news of a potential mega-merger with US rival Bristol Myers Squibb.1 The FTSE 250 and Small Cap Indexes have moved sharply higher in recent weeks, with the former finally moving above its previous high set in 2021.
United States
Legendary American investor Peter Lynch once said, “If you can follow only one bit of data, follow the earnings”. His Magellan Fund delivered an exceptional return of almost 30% per annum between 1977 and 1990, and his advice remains just as relevant today.2 Most S&P 500 companies have reported second-quarter results, with earnings per share* showing the strongest rate of growth since 2021 – rising by 28% compared with last year.3 Lynch would probably say it is no surprise that the S&P 500 Index has broadly followed this earnings growth, gaining more than 23% in a year.
(* Earnings per share = a company’s profit divided by the number of shares in issue)
Europe
It isn’t all plain sailing for large companies at present, with Volkswagen shares falling to their lowest level since 2010. Up to 100,000 job cuts have been announced in an attempt to reduce costs, with Chinese carmakers providing intense competition to established brands in several countries.4 Despite certain stock-specific challenges, European equities are performing well overall, with the French, German and Spanish markets each moving to new all-time highs this week as tensions in Iran have abated and oil prices have declined.
Asia & Emerging Markets
Japan took action to support the yen last week, after it fell to a 40-year low against the US dollar. In a rare move, the Japanese and US governments coordinated to buy around $60 billion worth of the currency between them. Whether it makes a lasting difference remains to be seen: the yen has gained 4% since the intervention, but has still lost more than one-third of its value in both sterling and dollar terms since January 2021. Cheap holidays may be found.
Elsewhere, the South Korean stock market continues to behave like a “penny stock” – rising or falling by up to 10% per day. The Korean public rushed to invest in companies such as Samsung earlier this year, as huge demand for AI hardware caused profits to skyrocket. However, the euphoria peaked in June and the local market has suffered a 40% decline since then, causing up to 1 in 30 Korean adults to receive a margin call from their stockbroker.5
Bonds
Government bond yields have been reacting to the price of oil recently. As oil rises, it increases inflation expectations, leading to a higher cost of borrowing for governments and consumers. In the US, Consumer Price Inflation (CPI) rose from 2.4% in February to 3.5% in June. UK CPI stands at 2.6% currently, but could face upwards pressure. Brent Crude has now dipped below $80 a barrel again, from the high-$90s two weeks ago. Let’s hope that trend continues.
Points of Interest
The SpaceX IPO was promoted to such an extent that retail investors reportedly submitted over $100 billion of buy orders for the $22 billion of stock being offered.6 The American public clamoured to be included, amid the hype. The stock is currently down 20% from its IPO price and 28% from its first live trading price. It often pays to remember Warren Buffett’s advice that investors should be fearful when others are greedy.
Summary
The current bull market has been in place since 2023, with corrections of 10% to 20% taking place each year. The latest dip came in March when the US attacked Iran, causing oil prices to spike. Stocks are now moving upwards again, with investors treating the conflict and oil supply issues like problems which are gradually being solved. Economic growth remains solid, corporate profits remain strong and market conditions remain good overall.
Note: Past Performance Is Not A Reliable Indicator Of Future Performance
Sources may be found online here, or provided on request
GWA Portfolio Performance
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MGTS Qualis Funds
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