The authors: DJE's Strategy Team monitors and assesses markets on an ongoing basis against fundamental, monetary and technical criteria.
August 2026 was, on the whole, a good month for equity markets. Commodity, technology and energy stocks performed particularly well worldwide, while utilities, real estate and consumer staples lagged behind.
Looking ahead to September, our underlying stance remains constructive, though risks are building. The US Federal Reserve's latest rate hike was largely treated as a non-event by markets: equities responded favourably, while yields edged lower. Sentiment has also deteriorated markedly from a technical perspective – the share of pessimists relative to optimists among market participants has almost doubled within a single week. From a contrarian standpoint, this is a supportive factor.
The current environment shows parallels with earlier phases marked by high interest rates, high energy prices and initial strains in the property market. Unlike in 2007, however, bank balance sheets today are considerably more robust. A key reason for the resilience equity markets have shown so far is earnings: profits at many large companies continue to rise significantly. Price gains are therefore driven predominantly by earnings growth rather than by expanding valuation multiples. We expect earnings to remain solid over the next six months as well. On a twelve-month view, however, conditions could deteriorate if high interest rates increasingly feed through to corporate earnings and the wider economy.
In artificial intelligence, attention is turning increasingly to the framework governing further development. Debate around tighter safety safeguards could slow new product launches. On our current assessment, though, this does not point to any slowdown in the build-out of computing capacity. We do not expect capital expenditure budgets to be cut at this stage.
Opportunities we see:
Japan: Sustained inflows from abroad – and, increasingly, from Japanese retail investors – are meeting strong corporate earnings. At the same time, companies are showing a growing willingness to return capital to shareholders, not least through higher share buybacks. Bank lending growth also remains solid, while currency movements have recently provided less of a headwind.
Energy and oil: Supply bottlenecks remain a supportive factor, including outages at Russian refining capacity, sanctions and risks to pipelines and terminals. Demand, meanwhile, is proving robust.
Semiconductors and AI infrastructure: The semiconductor sector is trading well below its highs. Given continued strong earnings, we see opportunities rather than additional risks heading into the fourth quarter. On our current assessment, the debate over stricter AI safety requirements is unlikely to hold back the expansion of computing capacity in any fundamental way.
Utilities: Rising electricity demand from data centres and AI applications is running up against limited capacity. This remains a structural theme for the utilities sector.
Agricultural commodities and fertilisers: Supply disruptions in agricultural commodities and high gas prices could underpin prices. In the fertiliser sector, this applies above all to nitrogen-based products.
Commodity currencies: The Australian dollar, Norwegian krone and Mexican peso remain in an uptrend against the euro.
Risks we are monitoring:
US debt and interest burden: With rates at around five per cent, interest payments already account for a large share of the US budget. Any further rise in rates would add to this burden. A crisis of confidence in the bond market remains a low-probability scenario, but could not be ruled out should foreign buyers withdraw.
Property market: In the US, the inventory of unsold homes is rising. The situation in German commercial real estate also remains strained. Banks have yet to report corresponding loan losses, but that could change over the medium term.
Seasonality and liquidity: A weaker market phase in the autumn cannot be ruled out. The second half of September is seasonally among the weakest periods of the year. In addition, a major IPO could temporarily drain liquidity from the market.
The economy in 2027: High real interest rates are weighing increasingly on consumers and companies, raising the risk of a slowdown in economic activity next year.
Financing the AI build-out: Heavy bond issuance across the AI space and wider credit default premiums at large technology and cloud companies point to rising credit risk. Should individual major AI providers run into funding difficulties, this could trigger a broader market correction.
Gas supply over the winter: European gas storage levels are low in places. A cold winter could therefore heighten the risk of regional shortages.
Legal notices
Marketing communication: All information published here is provided for information purposes only and does not constitute investment advice or any other form of recommendation. The statements contained in this document reflect the current assessment of DJE Kapital AG and may change at any time without prior notice. All information has been compiled with care on the basis of the knowledge available at the time of preparation. No warranty or liability is accepted, however, as to its accuracy or completeness.