Monthly Asset Allocation Update – July 2026

Transcript

Hi, I'm Matt Bance, and welcome to our July 2026 asset allocation update. I'll briefly outline how our portfolios are positioned and highlight some of the key changes we've made over the past month.

Let's start with the overall shape of the portfolio.

We remain overweight equities and have recently increased that position. However, we've continued to trim our overweight to credit as spreads have become increasingly compressed. We also remain underweight duration, primarily in the US.

Overall, our positioning reflects what we see as a supportive economic backdrop, with inflation remaining the more important risk than slowing growth.

We believe the most acute phase of the Middle Eastern conflict has now passed and expect oil flows to continue normalising, albeit with periodic flare-ups, at least through the US mid-term elections.

We think markets are likely to look through the political headlines and remain focused on oil flows and lower energy prices, which have helped moderate inflation expectations.

After a softer patch last year, the US labour market has shown a clear improvement. Measures of business activity, such as purchasing managers' indices, have also continued to improve despite ongoing uncertainty.

Second, we've been adding to European equities. From an economic perspective, Europe is one of the largest beneficiaries of improved energy flows and lower oil prices. Investor positioning had become decisively bearish, leaving scope for investor flows to improve as the outlook strengthens.

Third, we've increased our overweight to emerging market equities.

Emerging markets remain one of our preferred ways of gaining exposure to the structural AI investment cycle, particularly through supply-chain bottlenecks. This investment theme has come a long way since we first initiated it, with Taiwan and South Korea now overtaking China as the largest country weights within the benchmark, reflecting their central role in the AI supply chain.

For now, we believe the competitive pressure on the largest US technology companies to continue investing in AI remains firmly in place. We therefore expect capital spending—and the debt issuance helping to fund it—to remain supportive over the coming year.

Thanks very much for joining us, and we look forward to updating you again next month.