Q3 2026 Market Outlook – Quarterly Investment Review

We’re not investing approximately $200 billion in capex in 2026 on a hunch. Andy Jassy, CEO of Amazon

For the first time since the Medici were bankers to François I, yields on 10-year French government bonds now stand above the yields on Italian, Spanish, Greek or Portuguese bonds. Louis Gave

Markets Navigate Rising Yields and Political Uncertainty

Markets contended with several conflicting forces during the third quarter. Bond yields rose, the oil price spiked, and the political backdrop was unsettled as the US approaches the midterm elections in November, with an increasing expectation that President Trump may lose his majority in Congress. In July a $45 billion AI focused hedge fund blew up when the S&P500 was down just 3%, due to excessive leverage. Nonetheless corporate earnings were strong, and some announcements spectacularly so. Moderna declared a successful trial result in July, and its stock price recorded the largest ever one day move for an S&P500 share with a 177% jump. During the quarter the US 10-year bond yield rose from 4.47% to 5.29%. The S&P500 rose by 2.3%. The Brent crude oil price rose by 29.5%, and gold rose 3.7%.

Bond Markets Are Sending a Warning Signal

Longer dated government bond yields have been breaking important levels. The 30-year bond in the US is at 5.63% (its highest level since 2002), in Japan they have broken above 4% (a level never seen since the country issues at 30 years), and in France and the UK they are 5.47% and 5.95%. The US 10-year yields 5.29%, also the highest level since 2002. The size of government debt is far greater than it was when yields were previously at these levels, so these higher yields are much more painful than they were then. The US budget deficit continues to deteriorate. The deficit in July was $432bn, far worse than the expected $300bn, and a significant deterioration from the $291bn the previous July, and worse than any single month outside the Covid crisis. For the US, and other western countries, the arithmetic of this debt is becoming unforgiving. $8 trillion of US Government debt will roll over in the next 12 months at interest rates 1% higher than their current coupons, adding $80bn in extra annual interest payments.

This is before the $2 trillion annual deficit is funded. Each refinancing deepens the deficit and adds more debt. It is probably because of these runaway budget deficits that western bond yields are rising as markets start to question the sustainability of this enormous debt issuance. There is also the inflationary pressure from higher commodity prices. The day before the US bombed Iran the 10-year Treasury yield was at 3.95%, now it is at 5.29%. While oil prices have risen the impact has been cushioned by drawing down reserves. However there has been a much more dramatic rise in oil products, such as diesel where supply has been constrained by refineries being shut down in the Gulf, and the destruction of capacity in Russia. Higher prices for diesel and other oil derivative products feed quickly into higher transportation costs, and puts pressure on labour costs, all of which is inflationary and adds further pressure to bond yields. What is most worrying is that these deficits and spiralling costs are occurring during a relatively benign economic period. How much worse would the figures look if the economy slipped into recession. Nonetheless if US Treasury yields go much higher then US pension funds would start to be natural buyers. Their target return tends to be 6-8%. If yields approach 6% then it makes sense for them to buy that return in a product guaranteed by the government.

Structural forces make changing policy difficult for governments. For forty years interest rates fell, and for the decade and a half following the financial crisis of 2008 raising debt was almost cost free. Spoilt by these conditions’ governments expanded their spending plans, largely on welfare. A vast expansion of social spending ensued. Perhaps the height of this lax attitude to spending was President Trump’s promise to give every adult American a $5000 cheque if the Republicans retain control of both houses of Congress. If delivered this would see borrowed money offered to voters by a government already heavily overindebted. Now an ageing population requires more pension and healthcare payments, while globalisation introduced a far more competitive labour force leading to an entrenched unemployment class. Social welfare payments are ballooning.

Any threat to remove the benefits for these groups has proved electoral suicide, so necessary economic decisions have become politically impossible. The only way to curb profligate governments and control entitlement spending is for bond yields to rise to the point that threatens or produces a crisis which forces the government to take hard decisions. Bond markets appear to be doing just this. Governments are also facing competition from the private sector for the first time in many years. The slow recovery since 2008, particularly of the banking sector, has meant that the private sector has not sought major financing. The AI revolution has changed this. The largest technology companies which were self-financing up to now, have been conducting enormous spending on projects to develop their AI projects, which has required them to use the debt markets.

So, governments are demanding mountains of money for their welfare plans while the tech giants are demanding mountains of money for productive infrastructure like the grid, power, and datacenters. Money goes where it is treated best so governments need to compete for this capital with some of the most efficient and successful companies of all time. This is healthy. Nevertheless, rising rates are always uncomfortable for financial assets, because equity market corrections are nearly always caused by a recession or monetary tightening. The current rise on rates raises the potential for a setback.

The AI Investment Boom Faces Its First Real Test

Stock markets still continue to be dominated by the AI theme, which in turn is dominated by a handful of companies, particularly the so-called Magnificent 7 and semiconductor companies. July saw a sharp correction in these names, which wiped out the Situational Awareness fund. However, the most damage occurred in the Far East and particularly Korea, where speculative hysteria reached extreme levels. When the correction arrived 3.4% of the adult Korean population received a margin call, and there were stories of speculators selling their blood plasma to cover their losses.

Importantly though this correction was caused by financial over extension not fundamental earnings. The companies involved continued to post stellar earnings results. Nonetheless bond markets have started to question the gargantuan spending by the companies building the AI infrastructure and as with government debt the yields of the debt of US big technology companies have risen; and for example, in July the debt of Oracle was downgraded. The scale of the AI build out is enormous. The cumulative capital expenditure for the next few years is estimated at about $11 trillion which is far larger than previous large capital projects such as the internet build out in 2000 or housing boom that led to the bubble in 2008.

A lot of the cashflow from this expenditure goes to the semiconductor companies whose chips power everything, but the average life of these chips is far shorter than the railway tracks or fibre optic cables that were overexpanded during previous bubbles, so it is a valid question to ask what depreciation rate and what the return on capital of these investments will be? A considerable amount of the economic growth in the US has been due to the vast spending of Open AI and Anthropic, the leading developers of AI software, but this could slow down.

Both companies have highlighted risk concerns of the dangers of unbridled AI, and as the advantage gap has narrowed between them and their competitors, including Chinese models, it isn’t obvious why consumers will continue to pay several times more for the cleverest application when the other models perform adequately the task most users require. If this sector slows down, then that would have significant implications for both US GDP growth and the stock market.

Strong Earnings Continue to Support Equity Markets

With all these concerns why has the stock market held up so well? The principal reason is that earnings have been exceptionally strong, and this is partly due to AI starting to boost profits of companies beyond the technology sector by improving efficiency. Global earnings have been growing at a rate of mid-teens to twenty percent, which is well above anything experienced in post war history, other than in a recovery from a cyclical economic low point. The effect is twofold. AI can be used to improve productivity and to lower costs. It is particularly effective in companies that use a lot of data which it can digest and organise in seconds. Banking is one example and it is remarkable that while the technology companies have gone from being cash generative to debt hungry, banks have done the reverse going from being dependent on government bail outs to being in a position where they are returning significant amounts of excess cash to their shareholders.

Opportunities Beyond US Exceptionalism

This year is seeing further evidence of a reduction of American exceptionalism in terms of stock market performance. Since Trump was sworn in most other regions have outperformed the US, and in the case of the Emerging Markets and Japan by a handsome margin. This reflects better starting valuation levels of share prices outside the US, but also an improved economic environment.

Many Emerging Markets, for example, have followed far more orthodox economic policies than their Developed Market peers. With strong trade surpluses and far stronger fiscal balances than the West their currencies should appreciate offering extra potential for return. In terms of sectors the energy and mining sectors have been strong. Higher energy prices make oil stocks an obvious beneficiary of the troubles in the Middle East. It is an anomaly that they represent only 3.5% of the index yet are estimated to account for over 8% of the earnings.

The longer the oil price remains high the more glaring this anomaly will be. Mining companies have an equally strong outlook as they benefit from both government expenditure, due to the need to renovate old public infrastructure, and the AI boom, because datacentres and the electrification of the grid is commodity intensive. Gold should also perform well. History suggests that governments facing high debt burdens rarely overcome them through austerity. Especially in democratic systems they maintain nominal interest rates below the rate of inflation, which results in currency debasement and even financial repression.

This environment is supportive of gold as investors seek to protect their wealth and purchasing power. Moreover, for longer term investors an opportunity has been opened up by the crowding into the AI theme by most investors. Currently trading is dominated by computing program driven funds, passive flows, and pod shops that are chasing quarterly returns. They tend to herd into the same names and sell everything else. This creates an opportunity for investors with longer time frames that can buy companies with good fundamentals that have been sold to cheap levels, though the caveat to this is that there is no certainty on when they will be rerated.

Investment Outlook: Volatility Returns but Opportunities Remain

The Hormuz situation presents the world with more uncertainty than one and two quarters ago. Elevated and rising oil prices have a history of causing financial upheaval because of their effects on increasing prices and wages. When oil prices rise enough they have often tipped the economy into recession. Bond yields are reflecting this, but they also reflect strong growth, and this growth is producing strong corporate earnings. If the energy situation is resolved both bond and equity markets are likely to improve. The opportunities are in select areas, but investors are likely to have to withstand more volatility than in the past few years.

Written by James Macpherson

Click HERE to download the full Q3 2026 market oulook.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instrument referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

September 2026 Market Outlook | “Gimme Shelter” in an Increasingly Fragile Market

September 2026 Market Outlook

Each month, Pierre Mouton shares his perspective on global financial markets through the lens of a song that captures the prevailing market mood. Following August’s discussion of investor optimism in the face of rising bond yields, September’s market environment felt increasingly defensive. Inspired by The Rolling Stones’ “Gimme Shelter”, this month’s market commentary explores the growing concentration of market leadership, the challenges facing traditional safe havens and the implications for investors navigating a more fragile backdrop.

“Gimme Shelter” – The Rolling Stones, 1969

“Ooh, a storm is threatening…”

In a more fragile market backdrop, September made the message unmistakably clear: investors spent much of the month searching for shelter. Global markets were increasingly defined not by broad participation, but by tentative flights toward perceived safety and a growing concentration of leadership.

The gap between the capitalization-weighted S&P 500 and its equal-weighted counterpart widened further, underscoring how dependent market performance has become on a relatively small group of mega-cap companies. While the largest names continued to attract flows, the average stock struggled to keep pace. The result was a market that appeared healthy from afar but revealed increasing fragility upon closer inspection.

Traditional Safe Havens Fail to Deliver

Traditional defensive assets offered little protection during the month.

Long-duration government bonds, which historically serve as a refuge during periods of uncertainty, came under renewed pressure as yields moved higher. Gold, another classic safe haven, also disappointed. Despite ongoing geopolitical tensions and an uncertain macroeconomic environment, the precious metal retreated as higher real yields and a firmer U.S. dollar reduced its relative appeal.

Within equities, traditional defensive sectors such as Consumer Staples, Healthcare and Utilities failed to provide meaningful protection and ended the month in negative territory. September’s lesson was therefore not simply about risk-off positioning. Rather, it was about the scarcity of genuine shelter in a market where concentration is rising, bonds are struggling, gold is retreating and investors are increasingly forced to seek refuge in only a limited number of places.

As Gimme Shelter reminds us, when “the storm is threatening”, the search for protection can become the dominant investment theme, but shelter is not necessarily found where most expect.

Market Performance in September

The MSCI World lost 1.7% in September, while the S&P 500 declined 0.5%. Europe proved weaker, with the Stoxx 600 falling 2.5%, while Japan’s Topix slipped 1.2% and the MSCI Emerging Markets Index declined 0.8%.

The notable exception was the technology-heavy Nasdaq, which gained an impressive 3.2% despite the broader market weakness. Unsurprisingly, Growth outperformed Value (-0.2% versus -2.4%), illustrating once again the dominant role of a small group of growth-oriented companies in driving market returns.

Rising Bond Yields Continue to Pressure Markets

Developments in other asset classes played a significant role in shaping September’s investment outlook.

Ten-year government bond yields moved sharply higher across major markets: +26 basis points in Germany, +53 basis points in the United States and +68 basis points in France. French government bonds attracted particular attention, with the spread versus Germany exceeding 120 basis points for the first time since the 2011-2012 eurozone debt crisis.

Commodities delivered mixed performances. Oil prices advanced again, with WTI crude rising 5.4%, while Gold declined 6.2%, pressured by higher yields and continued U.S. dollar strength.

Credit markets also weakened modestly, with the iTraxx Crossover index down 0.8%. In contrast, cryptocurrencies performed well as Bitcoin gained 6.1% over the month.

Where Investors Found Shelter

Beyond the resilience of the Nasdaq, the only truly reliable shelter in September was cash in U.S. dollars.

The greenback strengthened against most major currencies, while yields on USD money market instruments remained close to 4%, providing investors with both stability and attractive short-term income. In a month characterised by narrowing market leadership and weakening traditional safe havens, cash proved to be one of the few places where investors could genuinely find protection.

Previous Market Outlooks

This content is provided for information purposes only and does not constitute investment advice, an offer, solicitation or recommendation to buy or sell any financial instrument or investment product.

The views and opinions expressed are those of NS PARTNERS SA at the date of publication and may change without notice. References to specific securities, sectors or market developments are provided for illustrative purposes only and should not be interpreted as investment recommendations or investment research.

Past performance does not predict future returns. The value of investments and the income derived from them may fluctuate and investors may not recover the amount originally invested. Investments involve risks, including possible loss of capital.

References to market indices, benchmarks or other measures of relative market performance are provided for information purposes only. NS PARTNERS SA makes reasonable efforts to ensure the accuracy of the information contained herein but provides no warranty or representation as to its completeness or accuracy.

Some entities of the NS Partners Group or their clients may hold positions in the financial instruments mentioned or may act as advisor to related issuers.

This content may not be distributed or used in any jurisdiction where such distribution or use would be contrary to local laws or regulations. Additional information is available upon request.

© NS Partners Group

Why Hedge Fund Selection Matters More Than Ever

Periods of market euphoria often encourage excessive risk-taking, the consequences of which only become apparent when the cycle turns.

Earlier this year, in our article Hedge Funds: 2026, the Year of Discipline, we argued that risk management would be one of the key differentiators in 2026. Looking back, that assessment appears to have been well founded.

For hedge fund selectors, 2026 has generally been a constructive year. Yet the environment has been anything but straightforward. Geopolitical tensions, the conflict involving Iran, persistent political uncertainty in the United States and the growing concentration of investment flows around artificial intelligence have created particularly demanding market conditions.

Equity long/short managers have, on the whole, generated positive alpha. Until the end of the second quarter, results were supported by sound sector allocation and effective stock selection. July, however, marked a sharp reversal. According to Goldman Sachs Prime Brokerage, it was the most destructive month for alpha generation since January 2022.

In an environment characterised by extreme market concentration, even highly disciplined managers struggled to avoid simultaneous losses on both long and short positions, despite the MSCI World Index ending the month in positive territory. The situation was further amplified by the collapse of a hedge fund heavily exposed to the artificial intelligence theme. Its concentrated and highly leveraged portfolio failed to withstand margin calls, triggering forced selling that reverberated across the broader hedge fund industry.

This episode serves as a reminder of a simple but critical reality: when markets become dominated by only a handful of investment themes, manager selection becomes increasingly important. Moments of euphoria often encourage excessive risk-taking, while the consequences tend to emerge abruptly when sentiment shifts.

At the same time, the hedge fund industry has attracted substantial inflows over the past five years. Several high-profile managers now oversee more than USD 100 billion in assets, while many multi-strategy platforms have experienced remarkable growth. At that scale, delivering differentiated performance becomes increasingly challenging. Maintaining a selective approach is therefore essential in order to avoid future disappointments.

We continue to favour two areas in particular: niche managers with limited capacity and strategies that still offer meaningful alpha potential, especially in Asia and within certain quantitative approaches.

Dispersion Creates Opportunity

Global Macro strategies have also experienced significant performance dispersion this year. In a volatile environment, the strongest managers have demonstrated an ability to manage risk effectively while adapting rapidly to changing market conditions. We continue to see particular merit in macro strategies given the economic and geopolitical uncertainties that remain. Access to the most talented managers, however, remains difficult and represents a meaningful advantage for investors with long-standing relationships across the industry.

Perhaps the most encouraging development this year has come from Asian long/short equity managers, particularly those focused on China. These managers successfully captured a meaningful share of the upside related to artificial intelligence while simultaneously reducing exposure during periods of market weakness. Their ability to adapt resulted in significant alpha generation while providing valuable diversification within portfolios.

Hedge Fund Selection Remains the Key Driver of Alpha

The hedge fund landscape continues to offer a wide range of opportunities, but manager selection and ongoing monitoring remain the primary drivers of long-term success. While private banks and investment platforms increasingly facilitate access to many of the industry’s best-known names, that is only part of the equation. The most compelling opportunities are often found among less widely known managers with limited capacity, specialised expertise and a genuine competitive edge. It is precisely in this segment of the market that active manager selection continues to create value.

Written by Cédric Dingens

Read the original French article published in AllNews:
Hedge Funds: la sélection fait toute la différence

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document.

This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities.

References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer.

Additional information is available on request.

© NS Partners Group

Markets Are Not Pricing a Bubble. They Are Pricing an Earnings Revolution.

Record highs may look uncomfortable, but the earnings revolution currently underway tells a very different story. The more important question is whether today’s extraordinary earnings growth can last.

Wall Street’s relentless march to new highs has reignited a familiar debate. Investors, policymakers and commentators increasingly question whether equity markets have become detached from reality. A handful of mega-cap technology companies now account for a growing share of market returns, while enthusiasm surrounding artificial intelligence continues to dominate headlines. To many observers, the ingredients of a speculative bubble appear obvious.

Yet the data suggest a more nuanced picture.

Markets are trading at record highs. More importantly, so are corporate earnings.

That distinction matters.

Historically, periods of genuine market excess have been characterised by valuations rising much faster than profitability. During the dot-com bubble, investors paid increasingly higher multiples for businesses whose earnings often failed to materialise. Prices were driven by optimism rather than results.

An Earnings Revolution, Not a Market Bubble

Today’s environment looks very different.

Recent earnings seasons have produced some of the largest upward revisions to profit expectations seen in years. After first-quarter results significantly exceeded forecasts, analysts were forced to revise expectations sharply higher. The same pattern has continued during the second-quarter reporting season.

The result is an unusually powerful acceleration in earnings growth.

Current consensus forecasts anticipate S&P 500 earnings growth of approximately 30% in 2026, followed by a further 13% in 2027 and 14% in 2028. Taken together, that represents cumulative earnings growth of roughly 67.5% over the next three years.

This is where the narrative surrounding valuations becomes more complicated.

Even if the S&P 500 were to deliver a relatively ordinary annual return over the same period, corporate profits would be growing substantially faster than share prices. Under such a scenario, investors could be paying lower valuation multiples in three years’ time despite positive market returns. Rising markets do not necessarily imply rising valuations.

One of the most overlooked developments of recent years is precisely this phenomenon. While index levels have reached new highs, valuation multiples have remained relatively stable. In parts of the technology sector, valuations have even declined as earnings growth has outpaced share price appreciation. In many cases, fundamentals have caught up with enthusiasm.

This observation complements another theme we recently explored in Angel’s CHART OF THE MONTH: AI AND MARKET RETURNS: LESSONS FROM PAST TECHNOLOGICAL REVOLUTIONS.Technological breakthroughs can transform economies without necessarily transforming long-term market returns. What makes the current environment unique is not just the technology itself, but the scale of the earnings growth currently emerging from it.

The AI Investment Cycle Behind the Earnings Revolution

The obvious question is what is driving such extraordinary earnings growth.

The answer lies largely in an investment cycle of historic proportions. Artificial intelligence has triggered what may become one of the largest capital expenditure booms in modern corporate history. Hyperscalers, semiconductor manufacturers and digital infrastructure providers are collectively investing hundreds of billions of dollars to build the computational capacity required to support the next generation of AI applications.

Importantly, the beneficiaries extend far beyond the most visible names. From networking equipment and cloud infrastructure to software and enterprise applications, a broad ecosystem is experiencing a level of demand that would have appeared unrealistic only a few years ago.

This is why today’s market may be better understood as an earnings story rather than a valuation story.

Investors are not merely paying higher prices for the same pool of profits. They are responding to a materially improved earnings outlook.

The Real Risk Is Not Valuation Multiples

That does not mean risks are absent.

In fact, investors may be focusing on the wrong risk entirely.

The question is not necessarily whether equity markets are experiencing a bubble. It may be whether they are experiencing an earnings bubble.

The distinction is subtle but critical.

If current profit growth proves sustainable, many valuation concerns could gradually disappear. If, however, earnings growth depends on an exceptionally high and ultimately unsustainable level of AI-related capital expenditure, today’s optimism may face a more meaningful test.

For now, there is little evidence of an imminent slowdown. Most major technology companies continue to signal substantial spending commitments, while demand for computing infrastructure remains well above available supply. Industry forecasts generally suggest that the current investment cycle has several years left to run.

History, however, offers a note of caution.

Railways, telecommunications networks and the internet all experienced extraordinary investment booms before eventually entering periods of normalisation. Artificial intelligence is unlikely to prove entirely different. At some point, expansion will give way to optimisation, and markets will need a new source of earnings acceleration.

Looking Beyond the Headlines

The lesson from today’s market environment is straightforward.

Record highs should not automatically be interpreted as evidence of speculation or excess. Prices considered in isolation can appear expensive while becoming increasingly reasonable when measured against a rapidly improving earnings outlook.

The more important challenge for investors is therefore not assessing where valuations stand today, but determining how long the current earnings revolution can endure.

As discussed in MAXIMILIEN’S RECENT ARTICLE, the key challenge for investors is increasingly about identifying which expectations are already embedded in prices and which opportunities remain underestimated by the market. What matters is not simply where valuations look cheap, but where future earnings power is still being mispriced.

As the gap between market narratives and corporate profitability widens, opportunities are likely to emerge for investors capable of distinguishing durable earnings growth from temporary enthusiasm. Ultimately, if earnings drive markets, the ability to identify businesses capable of sustaining that earnings growth may matter more than ever.

Further Analysis

This article is based on a broader research note exploring the relationship between earnings growth, valuations and the current AI investment cycle and prepared by our marketing team.

Download Document (PDF)

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only.

NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document.

This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities.

References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer.

Additional information is available on request.

© NS Partners Group

Markets Are Not Pricing a Bubble. They Are Pricing an Earnings Revolution.

Record highs may look uncomfortable, but the earnings revolution currently underway tells a very different story. The more important question is whether today’s extraordinary earnings growth can last.

Wall Street’s relentless march to new highs has reignited a familiar debate. Investors, policymakers and commentators increasingly question whether equity markets have become detached from reality. A handful of mega-cap technology companies now account for a growing share of market returns, while enthusiasm surrounding artificial intelligence continues to dominate headlines. To many observers, the ingredients of a speculative bubble appear obvious.

Yet the data suggest a more nuanced picture.

Markets are trading at record highs. More importantly, so are corporate earnings.

That distinction matters.

Historically, periods of genuine market excess have been characterised by valuations rising much faster than profitability. During the dot-com bubble, investors paid increasingly higher multiples for businesses whose earnings often failed to materialise. Prices were driven by optimism rather than results.

An Earnings Revolution, Not a Market Bubble

Today’s environment looks very different.

Recent earnings seasons have produced some of the largest upward revisions to profit expectations seen in years. After first-quarter results significantly exceeded forecasts, analysts were forced to revise expectations sharply higher. The same pattern has continued during the second-quarter reporting season.

The result is an unusually powerful acceleration in earnings growth.

Current consensus forecasts anticipate S&P 500 earnings growth of approximately 30% in 2026, followed by a further 13% in 2027 and 14% in 2028. Taken together, that represents cumulative earnings growth of roughly 67.5% over the next three years.

This is where the narrative surrounding valuations becomes more complicated.

Even if the S&P 500 were to deliver a relatively ordinary annual return over the same period, corporate profits would be growing substantially faster than share prices. Under such a scenario, investors could be paying lower valuation multiples in three years’ time despite positive market returns. Rising markets do not necessarily imply rising valuations.

One of the most overlooked developments of recent years is precisely this phenomenon. While index levels have reached new highs, valuation multiples have remained relatively stable. In parts of the technology sector, valuations have even declined as earnings growth has outpaced share price appreciation. In many cases, fundamentals have caught up with enthusiasm.

This observation complements another theme we recently explored in Angel’s CHART OF THE MONTH: AI AND MARKET RETURNS: LESSONS FROM PAST TECHNOLOGICAL REVOLUTIONS.Technological breakthroughs can transform economies without necessarily transforming long-term market returns. What makes the current environment unique is not just the technology itself, but the scale of the earnings growth currently emerging from it.

The AI Investment Cycle Behind the Earnings Revolution

The obvious question is what is driving such extraordinary earnings growth.

The answer lies largely in an investment cycle of historic proportions. Artificial intelligence has triggered what may become one of the largest capital expenditure booms in modern corporate history. Hyperscalers, semiconductor manufacturers and digital infrastructure providers are collectively investing hundreds of billions of dollars to build the computational capacity required to support the next generation of AI applications.

Importantly, the beneficiaries extend far beyond the most visible names. From networking equipment and cloud infrastructure to software and enterprise applications, a broad ecosystem is experiencing a level of demand that would have appeared unrealistic only a few years ago.

This is why today’s market may be better understood as an earnings story rather than a valuation story.

Investors are not merely paying higher prices for the same pool of profits. They are responding to a materially improved earnings outlook.

The Real Risk Is Not Valuation Multiples

That does not mean risks are absent.

In fact, investors may be focusing on the wrong risk entirely.

The question is not necessarily whether equity markets are experiencing a bubble. It may be whether they are experiencing an earnings bubble.

The distinction is subtle but critical.

If current profit growth proves sustainable, many valuation concerns could gradually disappear. If, however, earnings growth depends on an exceptionally high and ultimately unsustainable level of AI-related capital expenditure, today’s optimism may face a more meaningful test.

For now, there is little evidence of an imminent slowdown. Most major technology companies continue to signal substantial spending commitments, while demand for computing infrastructure remains well above available supply. Industry forecasts generally suggest that the current investment cycle has several years left to run.

History, however, offers a note of caution.

Railways, telecommunications networks and the internet all experienced extraordinary investment booms before eventually entering periods of normalisation. Artificial intelligence is unlikely to prove entirely different. At some point, expansion will give way to optimisation, and markets will need a new source of earnings acceleration.

Looking Beyond the Headlines

The lesson from today’s market environment is straightforward.

Record highs should not automatically be interpreted as evidence of speculation or excess. Prices considered in isolation can appear expensive while becoming increasingly reasonable when measured against a rapidly improving earnings outlook.

The more important challenge for investors is therefore not assessing where valuations stand today, but determining how long the current earnings revolution can endure.

As discussed in MAXIMILIEN’S RECENT ARTICLE, the key challenge for investors is increasingly about identifying which expectations are already embedded in prices and which opportunities remain underestimated by the market. What matters is not simply where valuations look cheap, but where future earnings power is still being mispriced.

As the gap between market narratives and corporate profitability widens, opportunities are likely to emerge for investors capable of distinguishing durable earnings growth from temporary enthusiasm. Ultimately, if earnings drive markets, the ability to identify businesses capable of sustaining that earnings growth may matter more than ever.

Further Analysis

This article is based on a broader research note exploring the relationship between earnings growth, valuations and the current AI investment cycle and prepared by our marketing team.

Download Document (PDF)

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only.

NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document.

This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities.

References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer.

Additional information is available on request.

© NS Partners Group

Rise of Luxury Experiences: Why Travelers Are Choosing Memories Over Material Goods

Rise of Luxury Experiences: Why Travelers Are Choosing Memories Over Material Good

Performance of luxury experience companies versus the S&P Global Luxury Index highlighting the growth of experiential luxury.

Luxury spending has long been associated with the purchase of high-end products such as designer handbags, watches and jewellery. Yet consumer preferences are evolving. Increasingly, luxury is being defined not only by what people own, but by what they experience. Travel, wellness, personalised services and cultural enrichment have become powerful drivers of spending among affluent consumers.

Since the pandemic, this shift has accelerated. Travellers are placing greater value on meaningful experiences, personal well-being and memorable journeys. Luxury tourism revenues have already surpassed pre-pandemic levels, supported by strong demand for premium hotels, cruises and wellness retreats. Industry estimates suggest that the global luxury travel market reached approximately $1.6 trillion in 2025 and is expected to continue growing at high-single-digit rates for the foreseeable future.

Financial Markets Are Reflecting the Trend

The impact of this shift extends beyond consumer behaviour and is increasingly visible in financial markets. As illustrated in this month’s chart, companies exposed to luxury travel, hospitality and wellness experiences have significantly outperformed the broader luxury sector over the past two years, suggesting investors are recognising the strength and durability of this structural trend.

Viking Holdings: Travel as an Experience

One of the clearest beneficiaries of this trend is Viking Holdings. Unlike traditional cruise operators focused on mass-market entertainment, Viking has built its brand around destination-focused travel experiences designed for affluent travellers seeking enrichment and discovery.

The company reported revenue growth of nearly 22% in 2025, reaching $6.5 billion, while maintaining occupancy levels of around 95%. To address rising demand, Viking plans to add 27 new river ships by 2028 and 10 additional ocean ships by 2031. These investments reflect management’s confidence that demand for experiential and destination-oriented travel will remain strong.

Premium Hospitality Continues to Expand

The same trend can be observed across the luxury hotel industry.

Hilton now operates more than 500 luxury properties across brands including Waldorf Astoria, Conrad and NoMad, while continuing to expand its flagship destinations in key markets. Marriott, through brands such as Ritz-Carlton, St. Regis and JW Marriott, continues to benefit from strong global demand for premium accommodation and exclusive travel experiences. With nearly 1.8 million rooms worldwide and more than 600,000 rooms in its development pipeline, Marriott is investing heavily to capture future growth.

Both companies have highlighted a growing preference for personalised service, exclusive destinations and memorable experiences as travellers choose to spend more on unique journeys and premium hospitality.

Wellness Becomes a Core Luxury Category

Beyond transportation and accommodation, wellness has become one of the most important pillars of the luxury experience economy.

This creates a significant opportunity for OneSpaWorld, the leading provider of wellness services onboard cruise ships and at resort destinations. The company operates more than 200 wellness centres, serves over 28 million cruise guests annually and controls more than 90% of the outsourced maritime wellness market. In 2025, OneSpaWorld generated record revenue of approximately $961 million, supported by growing demand for fitness programmes, nutrition services, medi-spa treatments and broader wellness-focused experiences.

Perhaps most importantly, wellness is increasingly viewed as an integral component of luxury travel rather than an optional add-on. Consumers are seeking experiences that contribute not only to enjoyment, but also to personal well-being.

The Future of Luxury

Taken together, the success of Viking, Hilton, Marriott and OneSpaWorld highlights a profound shift in luxury consumption.

Luxury goods remain an important part of the market. However, some of the strongest growth is now coming from experiences that offer discovery, wellness and personal enrichment. Both high-net-worth individuals and younger affluent consumers are prioritising travel, cultural experiences and self-care over the acquisition of additional material possessions.

The implication is clear: the future of luxury may be defined less by what people own and more by where they go, what they experience and how those experiences enrich their lives.

Written by Maria Hernandez Sanchez

Download PDF version: Chart of the Month_September 2026

This content is provided for information purposes only and does not constitute investment advice, an offer, solicitation or recommendation to buy or sell any financial instrument or investment product.

The views and opinions expressed are those of NS PARTNERS SA at the date of publication and may change without notice. References to specific securities, sectors or market developments are provided for illustrative purposes only and should not be interpreted as investment recommendations or investment research.

Past performance does not predict future returns. The value of investments and the income derived from them may fluctuate and investors may not recover the amount originally invested. Investments involve risks, including possible loss of capital.

References to market indices, benchmarks or other measures of relative market performance are provided for information purposes only. NS PARTNERS SA makes reasonable efforts to ensure the accuracy of the information contained herein but provides no warranty or representation as to its completeness or accuracy.

Some entities of the NS Partners Group or their clients may hold positions in the financial instruments mentioned or may act as advisor to related issuers.

This content may not be distributed or used in any jurisdiction where such distribution or use would be contrary to local laws or regulations. Additional information is available upon request.

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Is Value Making a Comeback, or Is It Becoming Harder to Find?

Investors are rediscovering Value, but genuine Value Investing opportunities are not always found in the market’s cheapest stocks.

Since peaking in October 2025, the MSCI World Growth / MSCI World Value ratio has gradually shifted in favour of Value. Capital is flowing back into discounted strategies, while several sectors that had long been overlooked are once again attracting investors’ attention.

A Rebalancing Towards Value, Not a Regime Change

Calling this a genuine regime shift, however, still feels premature. Market conversations remain dominated by artificial intelligence, digital infrastructure and the major US technology platforms. Even discussions around Value often circle back to the same question: who stands to benefit most from the next wave of AI-related investment?

That is precisely what makes the current environment so interesting.

The data point to a rebalancing, not an abandonment of Growth. Earnings, meanwhile, continue to tell a very different story from the one typically associated with a classic style rotation.

Across the United States, as well as in several regions that had previously lagged behind, earnings expectations continue to improve. Behind markets trading near record highs, investors find not only elevated valuations but also profits that are still being revised upward.

Much has been said about a potential artificial intelligence bubble. Yet a significant part of the recent market rally appears to reflect a steady improvement in earnings expectations rather than an uncontrolled expansion of valuation multiples. What markets may be rewarding today is not simply the promise of a technological revolution, but the reality of an earnings revolution.

Looking Beyond the Headlines

This distinction becomes clearer when looking beneath the surface of the indices.

Financials provide perhaps the most compelling example of a sector whose performance is rooted in a genuine improvement in fundamentals. Rising share prices have been accompanied by robust earnings growth, suggesting that the market is gradually correcting an overly pessimistic view of the sector.

Energy and several defensive sectors tell a different story. Their performance has been driven more by multiple expansion than by a comparable improvement in earnings. Returns in these areas reflect changing perceptions more than strengthening fundamentals.

The situation therefore becomes somewhat paradoxical.

Some sectors traditionally associated with Value are increasingly benefiting from higher valuation multiples. At the same time, several areas commonly classified as Growth continue to deliver strong earnings growth, even as valuations gradually normalise.

Technology provides perhaps the clearest illustration of this trend. Despite still demanding valuations, an increasing share of the sector’s performance is now supported by realised earnings growth. Investments linked to artificial intelligence are benefiting an ecosystem far broader than the mega-cap technology companies alone.

In other words, the debate is probably no longer about Value versus Growth. The more relevant question is: what expectations are already reflected in market prices?

Value Factor vs Value Investing

This is where the distinction between the Value Factor and Value Investing becomes particularly important.

The Value Factor systematically targets stocks that appear inexpensive according to a range of standardised valuation metrics. Value Investing, by contrast, seeks businesses whose intrinsic value exceeds their market price. The distinction may appear subtle, but it is critical. A bank trading at nine times earnings is not necessarily a bargain if those earnings represent the peak of the cycle. Conversely, a company trading at twenty-five times earnings may still be undervalued if the market underestimates its long-term ability to generate cash flows.

A stock can look cheap without actually being undervalued.

Why Value Investing Is Becoming More Challenging

This is perhaps the most interesting paradox in today’s market. Early signs of renewed interest in Value make the search for value more demanding, not less. As capital concentrates in the same sectors and the same securities, part of the available discount inevitably disappears.

The risk is therefore no longer simply missing a relative comeback in Value. It is assuming that everything labelled “Value” still represents a genuine Value Investing opportunity.

If the years ahead are driven more by earnings growth than by multiple expansion, investors may no longer need to choose between Growth and Value. The real challenge will be identifying which expectations are already reflected in prices and which remain underestimated. If that assessment is correct, the most compelling Value Investing opportunities may no longer be found within the Value factor itself, but in areas where the market continues to misjudge future earnings power.

Written by MAXIMILIEN MESTELAN

Read the original French article published in AllNews:
Le value revient-il… ou devient-il plus difficile à trouver?

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document.

This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities.

References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer.

Additional information is available on request.

Is Value Making a Comeback, or Is It Becoming Harder to Find?

Investors are rediscovering Value, but genuine Value Investing opportunities are not always found in the market’s cheapest stocks.

Since peaking in October 2025, the MSCI World Growth / MSCI World Value ratio has gradually shifted in favour of Value. Capital is flowing back into discounted strategies, while several sectors that had long been overlooked are once again attracting investors’ attention.

A Rebalancing Towards Value, Not a Regime Change

Calling this a genuine regime shift, however, still feels premature. Market conversations remain dominated by artificial intelligence, digital infrastructure and the major US technology platforms. Even discussions around Value often circle back to the same question: who stands to benefit most from the next wave of AI-related investment?

That is precisely what makes the current environment so interesting.

The data point to a rebalancing, not an abandonment of Growth. Earnings, meanwhile, continue to tell a very different story from the one typically associated with a classic style rotation.

Across the United States, as well as in several regions that had previously lagged behind, earnings expectations continue to improve. Behind markets trading near record highs, investors find not only elevated valuations but also profits that are still being revised upward.

Much has been said about a potential artificial intelligence bubble. Yet a significant part of the recent market rally appears to reflect a steady improvement in earnings expectations rather than an uncontrolled expansion of valuation multiples. What markets may be rewarding today is not simply the promise of a technological revolution, but the reality of an earnings revolution.

Looking Beyond the Headlines

This distinction becomes clearer when looking beneath the surface of the indices.

Financials provide perhaps the most compelling example of a sector whose performance is rooted in a genuine improvement in fundamentals. Rising share prices have been accompanied by robust earnings growth, suggesting that the market is gradually correcting an overly pessimistic view of the sector.

Energy and several defensive sectors tell a different story. Their performance has been driven more by multiple expansion than by a comparable improvement in earnings. Returns in these areas reflect changing perceptions more than strengthening fundamentals.

The situation therefore becomes somewhat paradoxical.

Some sectors traditionally associated with Value are increasingly benefiting from higher valuation multiples. At the same time, several areas commonly classified as Growth continue to deliver strong earnings growth, even as valuations gradually normalise.

Technology provides perhaps the clearest illustration of this trend. Despite still demanding valuations, an increasing share of the sector’s performance is now supported by realised earnings growth. Investments linked to artificial intelligence are benefiting an ecosystem far broader than the mega-cap technology companies alone.

In other words, the debate is probably no longer about Value versus Growth. The more relevant question is: what expectations are already reflected in market prices?

Value Factor vs Value Investing

This is where the distinction between the Value Factor and Value Investing becomes particularly important.

The Value Factor systematically targets stocks that appear inexpensive according to a range of standardised valuation metrics. Value Investing, by contrast, seeks businesses whose intrinsic value exceeds their market price. The distinction may appear subtle, but it is critical. A bank trading at nine times earnings is not necessarily a bargain if those earnings represent the peak of the cycle. Conversely, a company trading at twenty-five times earnings may still be undervalued if the market underestimates its long-term ability to generate cash flows.

A stock can look cheap without actually being undervalued.

Why Value Investing Is Becoming More Challenging

This is perhaps the most interesting paradox in today’s market. Early signs of renewed interest in Value make the search for value more demanding, not less. As capital concentrates in the same sectors and the same securities, part of the available discount inevitably disappears.

The risk is therefore no longer simply missing a relative comeback in Value. It is assuming that everything labelled “Value” still represents a genuine Value Investing opportunity.

If the years ahead are driven more by earnings growth than by multiple expansion, investors may no longer need to choose between Growth and Value. The real challenge will be identifying which expectations are already reflected in prices and which remain underestimated. If that assessment is correct, the most compelling Value Investing opportunities may no longer be found within the Value factor itself, but in areas where the market continues to misjudge future earnings power.

Written by MAXIMILIEN MESTELAN

Read the original French article published in AllNews:
Le value revient-il… ou devient-il plus difficile à trouver?

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document.

This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities.

References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer.

Additional information is available on request.

August 2026 Market Outlook: What a Fool Believes

August 2026 Market Outlook: What a fool believes

“What a fool believes” – Michael McDonald, the Doobie Brothers, 1978

August 2026 was another month in which investors appeared willing to suspend disbelief. Equity markets continued to push higher, supported by exceptional corporate earnings, resilient economic activity and relentless enthusiasm around artificial intelligence. Profit margins remain close to record highs, and consensus expectations still point to another year of robust earnings growth.

Yet beneath the surface, an important warning signal is flashing. Government bond yields have continued to rise, reflecting a world in which fiscal deficits remain elevated, debt issuance is accelerating and investors are demanding higher compensation for long-term lending. Historically, rising risk-free rates have eventually imposed a valuation discipline that equity markets cannot ignore indefinitely.

The current profit cycle has been remarkable, but history teaches that no cycle lasts forever. Competition increases, margins normalize and economic gravity ultimately reasserts itself. Today’s market narrative assumes that productivity gains, technological innovation and strong corporate pricing power will continue to offset higher financing costs. That may prove true for some time. However, believing that earnings can compound indefinitely while the cost of capital rises steadily requires an increasing degree of faith; As Michael McDonald magnificently reminds us in What a Fool Believes, “No wise man has the power to reason away” realities that eventually assert themselves.

“What a Fool Believes” comes to mind, indeed. The song tells the story of someone convinced that a past reality still exists, despite evidence to the contrary. Investors should be careful not to fall into a similar trap. Exceptional profit growth can persist longer than expected, but the combination of stretched valuations and rising government bond yields has rarely been a recipe for permanent market euphoria.

For now, the music is still playing. But prudent investors know that the most dangerous assumption in financial markets is that today’s extraordinary conditions will last forever.

The MSCI World rose 2.5% for the month, with all regions up, notably Emerging Markets and Japan (+3.2% and +3.8% respectively); Growth and Value performed evenly, but the second half of the month saw market concentration increase significantly.

If US 10 year yields barely moved for August, European Government bonds yields were on the rise, notably for France, whose spread versus Germany teeters with levels not seen since the 2012 eurozone crisis, but does not reach panic levels, for now. Gold rebounded sharply (+9.6%) as well as Bitcoin (+25.4% in August, but still down 10% year to date). Oil added 1.3% for the WTI, adding to the strong return provided year to date by most commodities; to wit, the CRB Index was up 6.6% in August and is now up 37.4% year to date.

This content is provided for information purposes only and does not constitute investment advice, an offer, solicitation or recommendation to buy or sell any financial instrument or investment product.

The views and opinions expressed are those of NS PARTNERS SA at the date of publication and may change without notice. References to specific securities, sectors or market developments are provided for illustrative purposes only and should not be interpreted as investment recommendations or investment research.

Past performance does not predict future returns. The value of investments and the income derived from them may fluctuate and investors may not recover the amount originally invested. Investments involve risks, including possible loss of capital.

References to market indices, benchmarks or other measures of relative market performance are provided for information purposes only. NS PARTNERS SA makes reasonable efforts to ensure the accuracy of the information contained herein but provides no warranty or representation as to its completeness or accuracy.

Some entities of the NS Partners Group or their clients may hold positions in the financial instruments mentioned or may act as advisor to related issuers.

This content may not be distributed or used in any jurisdiction where such distribution or use would be contrary to local laws or regulations. Additional information is available upon request.

July 2026 market outlook: The Message

July 2026 Market Outlook: the message

“The Message” – Cymande, 1972

In the spirit of Cymande’s 1972 funk classic The Message, markets spent July delivering a clear signal that investors would have been wise to heed. “Don’t watch where I go”, sings Cymande, conveying a message of shared wisdom, measured steps and the need to chart one’s own course rather than blindly following the crowd. A similar tone echoed across financial markets last month.

Semiconductor stocks, the high-flyers of the AI-driven rally, sent the loudest warning, falling roughly 20% on average. It was the group’s worst July performance in more than two decades. Several names that had gained more than 100%, and in some cases over 300%, year to date suffered sharp pullbacks, with declines reaching as much as 45%. Memory-related and equipment companies were particularly hard hit amid concerns around valuations, potential oversupply and the durability of the AI infrastructure boom.

Investors had already started rotating, at least partially, in June, trimming positions in the most extended names. The market was not, and is not, rejecting the long-term AI narrative. Rather, July’s price action signalled a renewed insistence on discipline around valuation and timing. It was not a call for panic, but for greater selectivity, respect for valuations and a willingness to “make your way” with more care instead of simply following prior momentum.

The MSCI World still gained 0.5% for the month, but beneath the surface the divergence between styles was striking. Growth declined 2.5%, while Value advanced 3.5%. The same pattern was visible across major equity indices. The S&P 500 slipped only 0.1%, whereas the Nasdaq fell 6.6%. Europe’s lower exposure to Technology proved beneficial, with the Stoxx Europe 600 gaining 1.2%. Meanwhile, the MSCI Emerging Markets Index lost 3.3%, weighed down by the sharp decline in Asian memory stocks. Japan finished the month broadly unchanged despite a strong Yen, which appreciated 3.2% against the US dollar.

Against a backdrop of renewed tensions in the Middle East, oil prices surged 21.5%, rekindling inflation concerns and contributing to a broad rise in government bond yields. The US 10-Year Treasury yield increased by 27 basis points, while Germany’s 10-Year Bund yield rose by 35 basis points. Gold was largely unchanged during the month and remains down 6.4% since the start of the year.

This content is provided for information purposes only and does not constitute investment advice, an offer, solicitation or recommendation to buy or sell any financial instrument or investment product.

The views and opinions expressed are those of NS PARTNERS SA at the date of publication and may change without notice. References to specific securities, sectors or market developments are provided for illustrative purposes only and should not be interpreted as investment recommendations or investment research.

Past performance does not predict future returns. The value of investments and the income derived from them may fluctuate and investors may not recover the amount originally invested. Investments involve risks, including possible loss of capital.

References to market indices, benchmarks or other measures of relative market performance are provided for information purposes only. NS PARTNERS SA makes reasonable efforts to ensure the accuracy of the information contained herein but provides no warranty or representation as to its completeness or accuracy.

Some entities of the NS Partners Group or their clients may hold positions in the financial instruments mentioned or may act as advisor to related issuers.

This content may not be distributed or used in any jurisdiction where such distribution or use would be contrary to local laws or regulations. Additional information is available upon request.