The main points of the allocation meeting on August 05, 2026
We slightly increased our overweight in emerging market equities in portfolios where we had trimmed the position at the end of June. Our view on emerging market equities remains positive, particularly following July's pullback. The technology sector's still-accelerating investment boom, strong earnings growth, and valuation levels that have become even more attractive continue to support the outlook for emerging market equities over the next 6–12 months.
Hopes for a diplomatic breakthrough with Iran rose over the weekend. President Donald Trump said he had called off a planned US strike on Iran's military infrastructure after appeals from Gulf allies, particularly Saudi Arabia. Iran and Oman are meanwhile reported to be close to an arrangement on the Strait of Hormuz. Brent crude fell 6.9% over the week to $90.12/barrel, with no new material escalation between the US and Iran.
Long-end government bond yields hit multi-year highs after last week's Fed and ECB decisions. The US Fed held rates steady, but three officials dissented in favour of a hike and new Chair Kevin Warsh offered little on the reaction function; the 30-year Treasury yield rose to a post-2007 high of 5.27%, and the 2s10s curve saw its sharpest weekly steepening since last April's sell-off. The ECB also held rates but signalled a September hike is likely, pushing the 10-year German Bund yield to a post-2011 high of 3.20%. Markets ended the week pricing a September ECB hike at close to 90%.
Equities gained on aggregate last week, but earnings drove sharp dispersion beneath the surface. The S&P 500 rose 1.05%as Microsoft (+21.7%) and Amazon (+17.0%) surged on their results while Apple (-7.2%) and Meta (-6.5%) fell on theirs; the Philadelphia semiconductor index still ended the week 4.3% lower despite an 8.2% single-day spike. European equities outperformed, helped by the falling oil price and a solid Q2 eurozone GDP print (+0.4% q/q), with the DAX (+2.1%) and CAC (+1.6%) leading, while Korea's KOSPI whipsawed to a 17.9% single-day surge that still left it down 1.4% on the week.
We overweight equities and underweight money markets. Within equities, we overweight EM equities, underweight European equities, and remain neutral elsewhere. In fixed income investments, we overweight high yield corporate bonds and underweight government bonds, while remaining neutral on emerging market bonds and investment grade corporate bonds.
