Second Half

We’ve just passed the halfway mark of the year, and it certainly hasn’t been boring. Inflation remains stubbornly high, geopolitical tensions continue to simmer, and the tariff war shows no signs of resolution. It’s also earnings season, and all the effects of the policy decisions made since January 20^th will begin to show up in the balance sheets of corporations.

With this much uncertainty, what should investors do? If history is any guide, not much. Inflation may not be retreating as quickly as we’d like, but it’s not spiking either. And despite all the criticism central banks have faced post-COVID, most markets are still hovering near record highs, even after the most aggressive interest rate hikes in modern history.

As regards the efforts by the US to redraw its global fiscal position, ironing out the details of 200 trade agreements will take time, tariffs or not. And with midterm elections on the horizon next year, the current administration is unlikely to embrace consumer pain in the short term. All of which means that it’s highly likely that negotiations will be pushed into the long grass.

Earnings will probably be fine, too. Otherwise, we would have seen more warnings, and rather ironically, the lack of guidance last quarter will make it easier for companies to beat “expectations”. What if the wars in Europe and the Middle East escalate? That risk is always there, but you can’t invest like that, otherwise you might as well stand on Oxford Street holding a “The End is Nigh” sign.