It feels like every outlet in the house has an electric fan plugged into it. The best part of your day is the commute, thanks to the blessing of the car’s air conditioning. Every work email sent out to multiple recipients results in a flood of ‘out of office’ messages dropping back into your inbox. The cat seems even lazier than usual.
Yes, it’s definitely August all right.
And stock markets have got the memo too. Last week, a closely watched measure of market volatility dropped to its lowest level of the year so far, and got close to the lowest levels seen in the last two years or so.
So City traders, it seems, are also off on holiday or sitting with their feet up at their desks. But are there also fundamental reasons for the calm? Happily, there are.
The key one, as covered last week, is the extraordinary growth in company profits so far in 2026 when compared with last year. (In turn, there are a few reasons for this, but the two primary ones are strong results from AI-linked companies and energy firms.)
Elsewhere, statistics on the crucial US economy remain mostly positive, with recent data on the manufacturing sector coming out ahead of expectations. Tax and tariff refunds, as well as less saving and more spending by consumers, are among the contributors keeping growth ticking along.
The latest data on annual inflation were also received well, with a slight fall from 3.5% in June to 3.4% in July. This led investors to hope that interest rates may not need to rise next month. Many of the major central banks clearly hope to get through the Iran war without raising rates at all; for investors, that acts as a subtle signal to keep taking market risk. (Lower interest rates encourage consumer spending and investing over cash saving.)
Given this backdrop, the investment team continues to take a positive view on the prospects for global shares. While the road ahead is never guaranteed to be free of potential bumps when investing, this lazy summer has at least revealed that many elements of the backdrop remain sound.
As autumn looms once more, investors can be happy that summer has cast plenty of sunshine on portfolios so far. Hopefully that will be some comfort as the fans are packed away and the jumpers dug out again…
