It’s all about perspectives…

01 September 2026

AT A GLANCE

Last week confirmed solid present fundamentals but also highlighted future uncertainty.
From Nvidia results to US inflation and policy, markets focus on the future, not the present.
The week ahead will provide leading indicators as well as important data on the US labor market.

Weekly returns were mediocre across asset classes. Stocks were overall flat, oil prices fell but the dollar and the short end of its yield curve rose, taking a toll on gold and safest bonds.

There was nothing wrong in economic data. July personal income and consumption, durable goods orders and PCE confirmed a solid picture for the world’s largest economy: resilient consumption, strong capex and stable inflation. Another positive was the US pivoting from military action to economic sanctions against Iran, as well as rumors of quiet and productive negotiations between various parties.

Markets however focus on the future. US consumer sentiment doesn’t improve, and Kevin Warsh’s speech as a Fed chair at Jackson Hole was clearly interpreted as hawkish, with an unapologetic focus on fighting inflation. Markets raised the probabilities of tightening in the coming months. The other important news of last week confirmed that perspectives matter more than past achievements: Nvidia’s share price didn’t rally because of another brilliant set of above consensus quarterly results, but only when the CFO announced an upbeat forward guidance on revenues.

Uncertainty warrants volatility, but not necessarily pain. Mr Warsh’s hawkish tone should not come as a surprise. Complacency would have raised concerns about future inflation, and pressured long-term interest rates, which considerably matter for the US administration. Activity remains robust, and if momentum is questionable, inertia isn’t, barring an external shock. The imminence of US midterm elections is probably a reason not to expect political or even financial risk-taking from Washington. Finally, current valuations are not outrageous after the spectacular Q2 earnings season, even taking into account its peculiarities and concentration.

The week ahead will provide colour on activity through leading indicators and hopefully help stabilize expectations for the Fed with the US monthly job report. Have a great week.

Cross-asset Update

The month of August is ending today, and so far 2026 has been positive for diversified portfolios. In our annual Outlook, titled “Eyes Wide Open”, we highlighted the numerous uncertainties that could hit markets at one point or another, as we saw the current times as a crucial phase of a secular transformation of the world, driven by technology and geopolitics. As always, we also expressed our forecast for portfolio returns: +4 to +8% for our three profiles in US dollars for 2026, with lots of volatility.

Between a war, an energy shock, an acceleration of AI buildup and related borrowing, concerns on sovereign debt sustainability and a new Fed chair who favours mystery over guidance, we had no shortage of unexpected events and as a result our (easy) call for volatility can be considered as right.

Now, for returns, our three profiles are up between 4.5% and 11% in 8 months, already exceeding our full year forecast. Rather than celebrating, we obviously must be a bit concerned: are we going too far, and are we borrowing returns from the future, taking the risk of some painful return to reality, especially as markets are increasingly focussing on future perspectives?

Before trying to answer, let’s admit that our projections are always conservative. Apart from 2022, our actual annual performance since 2018 has systematically exceeded our global investment outlook prediction. This is not a psychological trick to lower expectations on purpose, but one of the features of our process, which tends to focus on median rather than mean measures, which implies taking into account a broader range of possible outcomes, especially on the downside.

Now facts. First, the global economy is on track to reach, and potentially exceed, the IMF’s projected 3.1% real growth for 2026. Tech spending is a massive contributor, but consumption is resilient, with positive surprises, such as Japan, compensating for weaker areas, such as Europe. In addition, government spending goes unabated, for many reasons. Second, inflation. Exorbitant capex and geopolitical disruptions are obviously headwinds. Interest rates and future markets are reflecting these concerns. Will central banks declare war on inflation? We doubt it. They can tighten financial conditions, but this poses risks to growth, and solvency. What they cannot do is produce energy or manufacture chips. They have all reasons to sound hawkish, but all reasons to act cautiously, which is our baseline.

Then, valuations. Based on our own fair value assumptions, we acknowledge that there is little margin of safety in case fundamentals deteriorate. But assuming that economic inertia is not halted by an external shock, market valuations are not outrageous either.

We have thus kept our positioning only slightly defensive, while maintaining full allocations to the asset classes which we believe are supported for the long run, such as emerging markets and gold.

We expect volatility, as uncertainty meets strong animal spirits, but not an imminent catastrophe.

Risk aversion came back last week and it wasn’t about geopolitics

Fixed Income Update

Fed Chairman Warsh used his first Jackson Hole speech to reset his communication approach, presenting a reaction function broadly aligned with the FOMC. He gave no September guidance, with markets pricing roughly even odds of a hike, but signalled openness to tightening if inflation fails to improve. Warsh reaffirmed the Fed’s 2.0% PCE inflation target and confirmed that the fed funds rate remains the main policy tool. This dismissed the notion that Warsh may leverage the Fed’s balance sheet to tighten financial conditions without having to raise the Fed funds target range. Recent labour and inflation data do not yet justify a hike, but the FOMC remains biased toward further tightening while inflation is above target and financial conditions are not seen as restrictive. Markets priced in more tightening after the speech, though the macro picture is unchanged. A more bearish front-end rates view would require renewed upside surprises in labour and inflation data. Currently, our House View maintains zero hikes for this year vs market expectations for a 36 bps rate hike.

The US Treasury curve has flattened sharply, while spreads have remained rangebound this week as markets have digested a slew of strong macro data alongside Chair Warsh’s Jackson Hole remarks. US Treasuries sold off across the curve, led by the front end. The 2Y yield rose to 4.28% on Friday, its highest since 31 July, gaining nearly 9bp intraday after Warsh’s speech, while the 10Y increased only ~2bp and the 30Y declined, driving sharp curve flattening.

US IG supply reached a record August high above $145bn, surpassing the prior $136bn record. Investors preferred IG funds to HY ones. HY funds posted a $1.5bn outflow, the largest since May, reversing the previous week’s $97.1m inflow while IG fund inflows slowed to $906.7m from $1.9bn, while Treasury inflows accelerated to $3.9bn from $3.4bn. HY was the week’s top performer, with Bloomberg USD Corp HY spreads tightening 8bps, while the Bloomberg EM USD Aggregate OAS narrowed 7bp to 155bp, led by Brazil.

GCC debt index spreads tightened by 8 bps over the past week to 96 bps over Treasuries. Sovereign spreads were largely stable, while Bahrain outperformed the broader market, with spreads compressing by 2-9 bps across the curve on a weekly basis and by 25-30 bps over the past month. Several GCC sovereigns are now trading through their pre-conflict spread levels, with Saudi Arabia's spreads approximately 20 bps tighter than before the conflict. Long-duration and real estate bonds also recovered part of last week's losses.

Risk aversion came back last week and it wasn’t about geopolitics

Equity Update

Equities spent the week waiting on two events and got a clean answer from each. Nvidia went in as the pressure point, down seven straight sessions, its longest slump since 2022, on nerves about chip price increases and the durability of AI demand, and it delivered the number the whole complex needed. Revenue more than doubled to $96.2 billion, and more importantly the company guided to roughly 70% revenue growth next fiscal year against expectations of 45%, describing even that as supply constrained, which is another way of saying demand is not the limit. The stock jumped 8.7% on Thursday, adding $442 billion in the second largest one day gain of all time behind Microsoft's a month earlier, and analysts raised next year's estimates by 16% within a day, which leaves the stock at about 15 times those earnings, below the index multiple. Friday then gave part of it back after Jackson Hole, with the rate sensitive corners of the market, gold miners, biotech, the long duration tech names, leading the declines, and Nvidia itself closing the week only slightly higher. The S&P 500 finished up 0.5%, but most sectors actually fell, and to us the more telling move was software. Salesforce surged 23% for its best day since 2020 on its strongest orders in four years and a deeper Anthropic partnership that puts its products inside Claude, CrowdStrike rose 21% to a record on AI security demand, and Benioff told the skeptics it is time to stop the SaaSpocalypse nonsense. The bar cuts both ways now, though. Marvell beat and raised and still fell 10% after a 187% run this year, PayPal sank 12% when the Stripe and Advent consortium walked away from its bid, and Meta quietly closed one of the market's stranger tail risks, agreeing to pay up to $18 billion to settle the states' social media cases after its own lawyers had sized a courtroom loss in the trillions.

Europe added 0.1% with energy the worst sector as oil retreated, travel and financials led, and France was the soft spot again on domestic politics, yet forward earnings for the region kept rising even as prices cooled, which reads as a valuation pause rather than a fundamental one. Asia split. Japan led, the TOPIX up 2.0%, with the banks rallying back toward their July highs and doing the heavy lifting while the yen weakness pressured the rest of the index's usual leaders. China slipped 1.1% through a heavy reporting stretch in which misses outnumbered beats across the CSI 300, though the week ended with property developers getting their strongest policy support in years, longer mortgages, backing for fundraising and an end to the pre sales model, which landed better than the market expected. The AI buildout was visible in the capex lines, Alibaba up 75%, Tencent up 176% and Baidu up 201%, spending reads as going mostly into domestic chips, while CXMT, now China's largest listed company after a 570% run since its July debut, reported maiden results with first half revenue up more than 870%. Korea fell 1.8% on profit taking in the memory names even after SK Hynix said the shortage could persist through 2030, Taiwan added 2.5%, and Dubai rose 0.4%.

This week the earnings calendar quiets but keeps the reads that matter. Broadcom on Wednesday is a major AI test, Dell reports Tuesday, and Palo Alto, Zscaler and Snowflake extend the software rerating case that Salesforce just made. Shein lists in Hong Kong on Tuesday in the year's biggest consumer debut there, the same day John Ternus formally takes over from Tim Cook at Apple, and CXMT's new rival YMTC moves through the listing pipeline behind it.

Risk aversion came back last week and it wasn’t about geopolitics

Written by:

Maurice Gravier Chief Investment Officer , [email protected]
Nawaf Alnaqbi Head of Equity Strategy , [email protected]
Satyajit Singh Fixed Income Analyst , [email protected]
Giorgio Borelli Head of Asset Allocation , [email protected]

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