Monthly CIO View

Monthly CIO View 19 August 2026

Monthly CIO View – Private Banking

EXCEPTIONAL EARNINGS SEASON SUPPORTS MARKETS DESPITE GEOPOLITICAL TENSIONS Nicolas Bickel, Group Head of Investment Private Banking & CIO

The summer lull, which is generally characterised by relatively low trading volumes, unfolded in two phases this year. First, there was a correction in the “excesses” seen in the technology segment, particularly semiconductors, followed by a broad rebound after an exceptional earnings season that eased concerns over the scale of investment and its monetisation.

This rebound is taking place against a persistently uncertain geopolitical backdrop. The situation between Iran and the United States, particularly regarding the issue of the full reopening of the Strait of Hormuz, still appears intractable. Yet it has been entirely overlooked by equity markets, even as it affects money and bond markets. The 60-day ceasefire provided for under the memorandum of understanding signed by the two parties in June expired last Monday. This deadline could increase uncertainty surrounding the evolution of the conflict and weigh on equity markets. Despite geopolitical tensions, the S&P 500 has posted 28 record highs so far in 2026. The first week of August was notably the S&P 500’s best-performing week since last April, with a gain of 3.58%.

Broader participation in index performance Following the sector and factor rotation that had been underway since June, during which technology stocks had weighed on index performance, the upward trend resumed with renewed momentum. Despite recent volatility in the sector, semiconductors have again risen sharply in recent weeks, rebounding by more than 15% from their late-July lows. However, the current recovery is supported by a larger number of stocks and sectors than just the leading semiconductor names. Around 75% of S&P 500 stocks are delivering positive performance in August, compared with less than 60% in July. Since the end of June, 50% of S&P 500 constituents have outperformed the index, compared with only 30% in the second quarter—despite the quarter having been one of the five best since 1990. In August, the average performance of index constituents has exceeded 6%, compared with 3.9% for the index itself, highlighting the broadening of market performance. Against this backdrop, and after several years of lacklustre performance, small- and mid-cap companies are outperforming, particularly in the United States. The US Russell 2000 index is therefore up more than 23% year to date, compared with 13% for the S&P 500.

Very strong corporate earnings despite inflation proving slow to decline As expected, second-quarter 2026 results confirmed the resilience of US and European equities, providing some reassurance to investors about the ability of certain technology companies to sustain exceptional profit growth while monetising their substantial investments. With more than 90% of companies having reported so far, S&P 500 earnings per share (EPS) are up 30% year on year, 4% above the most optimistic expectations and well ahead of the 18% recorded in the first quarter. Unsurprisingly, artificial intelligence (AI)-related stocks are outperforming, with median EPS growth of 28%, compared with 12% for other stocks.

As a result, the sector posted 72% growth in the second quarter, compared with 54% in the first quarter, supported by strong earnings growth among semiconductor companies and hyperscalers, whose cloud businesses have accelerated. The energy sector also stands out, boosted by higher oil prices and