MS Nick Savone Global Reflections

Global Reflections Nick Savone · Morgan Stanley · Managing Director, IED Sat 15 Aug 2026

Sales commentary only (not a product of research). For institutional client use only.

There is something about mid-August that always feels slightly unfair. Summer is still very much here, yet the reminders that it won’t last forever are starting to pile up. Markets seem to be enjoying their own final stretch of summer. US equities notched a third-straight week of gains, and volatility drifted lower during a quiet, low-volume week. More importantly, two of the bigger tests heading into the end of summer (CPI and PPI) were passed with flying colors, while earnings remained remarkably strong and AI enthusiasm found another gear. There is still plenty worth keeping an eye on, from Hormuz to elevated positioning, but for now it seems like many are content to enjoy the remaining daylight. Back to school season is coming…though the market doesn’t appear quite ready to pack up summer just yet!

Earnings provided another reminder that while summer may be winding down, the fundamentals are certainly is not. S&P 500 2Q26 EPS growth is now tracking at +50.6% YoY vs +21.2% expected entering the quarter, with aggregate EPS surprises of +23% and the median stock beating by +6%. Hyperscalers have done plenty of the heavy lifting but as we have noted before, stripping them out still leaves S&P earnings growth at a very healthy +28.1%. The tape was equally interesting. Super Micro Computer (SMCI) and Lumentum (LITE) reinforced strong AI demand, while Cava (CAVA), Brinker (EAT), and Birkenstock (BIRK) showed the consumer still has some life. Cisco (CSCO) fell this week despite beating and raising as investors focused on slowing growth and margins, while Applied Materials (AMAT) was another reminder that a good report can still fail a very high bar. Perhaps the best snapshot of this summer’s volatility was Sandisk (SNDK), which had nearly halved during July and somehow remained one of the year’s standout winners – a reminder of just how extraordinary the run had been before the unwind…only to surge ~36% this week as investor-day commentary reignited enthusiasm. Sometimes the names investors leave behind for summer vacation are the first ones they want back when September approaches.

AI itself is also heading back to class with a slightly more “advanced” curriculum. CoreWeave (CRWV) and Nebius (NBIS) highlighted strong enough compute demand to support higher pricing, while NVIDIA (NVDA) introduced six institutional partners that could mobilize as much as $500B into independent AI- factory financing platforms. The interesting part is not simply another enormous capex number. Third- party investors would provide most of the capital, potentially making the ecosystem feel less “circular,” while NVDA could participate in economics above project breakevens through revenue-sharing arrangements. It is early, and plenty needs to go right, but the conversation around AI continues to evolve from how much can be spent? toward who captures the economics once all that infrastructure is actually used? That feels like a healthier question for the next phase of the trade.

The macro also offered investors a relatively easy “first exam.” Core CPI rose just 0.22% MoM in July while headline CPI increased 0.07%, bringing core inflation down to roughly 2.5% YoY from its May peak. PPI was a little more nuanced, but the broader disinflationary trend remained intact, with July core PCE now tracking around 0.23% MoM and 3.3% YoY. Markets responded accordingly: the probability of a September Fed hike fell to 28% from roughly 52% at the start of the week, while only ~21 bps of tightening is priced through year-end. July retail sales were softer at -0.6% MoM and Michigan sentiment disappointed, but discretionary demand has remained resilient YTD and small-business optimism actually rose to its highest level of 2026. The one subject investors seem happy to leave unread on the summer syllabus is geopolitics. Renewed attacks on UAE-operated tankers and stalled diplomacy around Hormuz keep a meaningful tail risk alive, even as consensus continues to treat US-Iran tensions as a prolonged…