Investment Traffic Lights EN

CIO View Investment Traffic Lights August 5, 2026 Marketing material

Our monthly market analysis and positioning IN A NUTSHELL

— July was marked by high volatility, particularly in individual stocks. — The Iran war flared up again, the new Fed Chair raised many questions, and some technology stocks struggled with overly elevated expectations. — Against the backdrop of a stabilizing economy and the valuation correction that Vincenzo Vedda has taken place, we are optimistic about the autumn outlook and are upgrading Chief Investment the technology sector. Officer

1 / Market overview 1.1 Strong earnings season overshadowed by the Gulf conflict, the new Fed and AI fatigue In a July of tragic wildfires, financial market participants too faced risks amid highly volatile markets. Markets were shaken above all by: the rekindling of the conflict in the Gulf; the unconventional start by the new chairman of the U.S. Federal Reserve (Fed); and finally by the continuing questioning of the prevailing AI narrative -- "more is more" – that is used to justify huge volumes of AI spending.

The Gulf conflict led unsurprisingly to another rise in oil prices, with Brent crude climbing from just above U.S. dollar (USD) 70 per barrel at the beginning of the month to more than USD 100 at its peak. This, in turn, affected bond yields, which also had to contend with a memorable press conference by new Fed Chair Kevin Warsh, following the Fed’s July meeting. In it Warsh emphasised how little he thought of short-term fine-tuning of market expectations. Instead, he wanted to leave it to markets to form their own independent view of the economic environment, rather than anticipating Fed reactions. Whether this experiment succeeds in the long run remains to be seen. In the short term it unsettled the market, provoking the highest 30-year U.S. Treasury yield since 2007, at 5.27%, and the highest 10-year German Bund yield since 2011, at 3.20%. That said, these rises cannot be attributed to Warsh alone. There is justifiable concern that government spending is pushing debt levels and long-term yields higher. And another macro driver may be at play: the economy is performing better than expected. This was evident in numerous macroeconomic data releases, resulting in sharply rising surprise indicators in what has so far been a very solid earnings season.

High expectations surrounding technology stocks fuelled sharp market swings Just a few months ago, few market participants would have expected companies to navigate the war-stricken second quarter so successfully. More than half of index constituents have now reported their results and S&P 500 companies are showing revenue growth of 15% year-on-year and Stoxx Europe 600 companies 9% year-on-year, while their earnings growth is significantly higher but distorted by many one-off factors. The European market in particular has welcomed this, with the DAX reaching a new high at the beginning of August. In the U.S. it was the Equal-Weight S&P 500 index that reached a new record.

Behind this lies sector rotation in the second quarter. While the heavyweight stocks, particularly in the technology sector, were hit quite hard in some cases, value stocks and/or defensive sectors proved considerably more resilient. Technology

This information is subject to change at any time, based upon economic, market and other considerations and should not be construed as a recommendation. Past performance is not indicative of future returns. Forecasts are based on assumptions, estimates, opinions and hy- pothetical models that may prove to be incorrect. Alternative investments may be speculative and involve significant risks including illiquid- ity, heightened potential for loss and lack of transparency. Alternatives are not suitable for all clients. Source: DWS Investment GmbH. \1

Investment Traffic Lights August 5, 2026

stocks once again delivered very strong quarterly results yet concerns emerged in the market regarding the AI complex: would the industry's staggeringly high levels of investment really pay off one day? Would lower-cost Chinese models continue to gain market share? And might policymakers eventually take a stricter approach to…