Global Equity Rally Broadens
Global equities are up 15% YTD, supported by broadening corporate earnings growth across regions and sectors.
Rising earnings and investment continue to outweigh the headwinds from tighter monetary policy and ongoing energy market disruptions, keeping the outlook constructive for the rest of the year.
Our Base-Case Scenario for the Remainder of 2026: Strong Earnings and Investment With Uncertain Monetary Policy
Market Movers: 2026 Year to Date
Key Market Drivers for the Remainder of 2026
Key Risks
How to Take Advantage of the Positive Investment Environment?
SystematicEdge has developed a series of investment strategies that give investors a diversified, cost-efficient exposure to Equity, Fixed Income, and Commodities. Our strategies are based on three pillars:
The performance of our flagship strategies in 2025 and 2026 year to date is shown in the table and chart below.
To see the full factsheets for our strategies, please contact insights@systematicedge.com.
Global Asset Outlook: Mixed Equity Performance, Rising U.S. and Euro Yields, Strong Oil Rally
Global markets delivered mixed performance in July, with U.S. equities easing, Europe remaining resilient, and Chinese stocks rebounding strongly, while Japan and Korea experienced sharp monthly declines despite solid year-to-date gains. In Fixed Income, U.S. and German 10-year government bond yields moved higher, contrasting with a modest decline in China’s yield. Currency markets saw strength in the euro and Australian dollar, alongside a weaker U.S. dollar against the yen and renminbi. Commodities were led by a surge in WTI crude oil, while copper remained firm and gold stayed negative year to date. Cryptocurrencies rebounded during the month, led by Ether and Bitcoin, but major digital assets continued to post significant year-to-date losses.
Equity: Global equities delivered mixed performance in July. U.S. markets eased, with the S&P 500 closing at 7,490 (-0.1% MTD; +9.4% YTD) and Nasdaq 100 at 28,274 (-6.6% MTD; +12.0% YTD), while the VIX declined to 16.0. European equities were resilient, with the Euro Stoxx 50 up 0.5% MTD and 9.8% YTD at 6,358. Asian markets diverged sharply: Nikkei 225 fell 8.1% MTD but remained up 27.9% YTD, while KOSPI 200 retreated 23.6% MTD despite a strong 72.7% YTD gain. Chinese equities rebounded, with HSCEI up 13.9% MTD and Hang Seng TECH up 8.0%, though both remained negative YTD. NIFTY 50 rose 2.2% MTD but was down 6.7% YTD.
Fixed Income: Government bond yields rose in Western developed markets, with the 10-year U.S. Treasury yield at 4.74% (+0.27% MTD; +0.57% YTD) and the 10-year German yield at 3.23% (+0.37% MTD and YTD). China diverged, with the 10-year government yield at 1.72%, down 0.03% MTD and 0.14% YTD, reflecting a lower-rate environment.
Currencies: The euro strengthened, with EURUSD at 1.1527 (+0.9% MTD; -1.9% YTD), while AUDUSD at 0.7021 gained 1.5% MTD and 5.2% YTD. The U.S. dollar weakened against the yen and renminbi, with USDJPY at 157.57 (-3.1% MTD; +0.6% YTD) and USDRMB at 6.7525 (-0.6% MTD; -3.2% YTD).
Commodities: In energy markets, WTI crude oil surged 21.8% MTD and 47.5% YTD to USD 84.67/bbl. Industrial metals remained firm, with copper at USD 14,189/mt up 3.9% MTD and 14.3% YTD, while gold at USD 4,049/oz gained 0.7% MTD but remained down 6.4% YTD.
Crypto: We note cryptocurrencies staged a mixed monthly recovery, with Bitcoin at USD 62,899 (+7.2% MTD) and Ether at USD 1,861 (+18.2% MTD) posting strong gains. Despite the rebound, year-to-date performance remained weak, with Bitcoin down 28.3%, Ether down 37.5%, and Solana down 0.9% MTD and 41.3% YTD to USD 72.90.
Global equities are up 15% YTD, driven by broadening earnings growth across regions and sectors. Markets are looking past the Middle East conflict, supported by resilient consumption, strong capital investment, supportive fiscal policy, and a manufacturing recovery. We expect 20% global EPS growth in 2026, with earnings broadening beyond technology. We recommend a diversified regional and sector allocation, while monitoring risks from the Strait of Hormuz, rising inflation and increasing competition in the technology sector.
In the U.S.: Broad-Based Equity Rally Supported by Earnings, S&P 500 Up 12.8% YTD
Year-to-date performance remains strong, with nearly all sectors posting positive returns. Improving earnings breadth and a recovery in manufacturing are driving the rally, and we expect S&P 500 EPS growth of approximately 25% this year. We believe the bull market has further room to run, supported by robust earnings, accommodative monetary policy (so far), and continued AI investment and adoption.
In Europe: Earnings Recovery Gains Momentum, Euro Stoxx 50 Up 11.8% YTD
European equities are benefiting from a cyclical earnings recovery, supported by stronger manufacturing, disciplined cost management, and investment in AI, electrification, defense, and energy security. We expect around 20% earnings growth in 2026, exceeding current market expectations. As geopolitical risks ease, the rally should broaden to banks, industrials, and other cyclical sectors, while German equities are gaining momentum on structural reforms. We continue to favor a diversified allocation across European sectors and markets.
In China: Growth Opportunities from AI Leadership, HSCEI Down 3.5% YTD
China equities remain attractive, supported by strong earnings growth, compelling valuations, and the global AI investment cycle, with the semiconductor, tech hardware, and infrastructure sectors particularly well positioned. Consensus expects a 30% EPS annualized growth over the next two years, while China’s integrated AI value chain, policy support, and improving monetization outlook reinforce the sectors’ structural appeal. Beyond technology, we continue to favor power equipment, health care, and yield-oriented stocks, while tighter oversight of outbound investment may increasingly direct capital toward strategic, policy-aligned sectors.
FX markets remain sensitive to developments in the U.S.-Iran conflict, but with global oil markets adapting, Brent is unlikely to exceed USD 100/bbl, reducing the likelihood of G10 rate hikes. Pro-growth currencies, particularly the RMB, should benefit from this backdrop, supported by strong trade surpluses and policy support. The main risks are more aggressive Fed tightening or renewed energy disruptions that weaken global growth. In this environment, disciplined FX hedging remains essential to protect capital.
EUR/USD: Down 1.6% YTD to 1.1550, Gradual Upside with Downside Energy Risks
Despite Europe’s dependence on energy imports, the U.S.-Iran conflict has had only a limited impact on EUR/USD. We expect oil prices to stabilize and European fiscal stimulus to support a gradual rise toward 1.20 by year-end, the upper end of the past 12-month 1.15–1.20 range. A prolonged escalation in the conflict, while not our base case, could push EUR/USD toward 1.10 through higher energy prices and weaker European growth. Given this wide 1.10–1.20 outlook and the risk of renewed Fed rate hike expectations, active FX hedging remains essential.
USD/RMB: Down 3.3% YTD to 6.75, Structural RMB Strength Remains Intact
We expect the downtrend to continue toward 6.20 within the next 12 months, supported by gradual PBoC-guided RMB appreciation of approximately 0.5% per month amid a temporary U.S.-China truce on tariffs and strong export-driven capital flows. China’s average USD 100bn monthly trade surplus continues to generate sustained USD-to-RMB conversion demand. The main risk is a stronger-for-longer U.S. dollar driven by a more hawkish Fed. Given this uncertainty, active FX hedging remains essential for businesses with cross-border exposure to China.
USD/JPY Flat YTD at 157.75, Near a 40-Year High: Intervention Supports a Stronger Yen
Japan’s FX intervention has capped near-term USD/JPY upside without changing the structural drivers of yen weakness, while its unexpected timing has increased its deterrent effect on speculation. As the BoJ gradually normalizes its monetary policy, intervention risk is likely to provide greater support for the yen than domestic monetary fundamentals. We expect the yen to strengthen, with USD/JPY moving back toward the 140 support level within the next 24 months.
Bank Bonds Offer Compelling Yields above 5.5% in USD
The U.S. economy lost 23k jobs in July versus expectations for an 80k gain, while the Fed left rates unchanged in July and signaled no urgency to tighten. We expect disinflation to outweigh temporary energy-driven inflation, creating asymmetric downside risk for bond yields. The 10-year Treasury yield (benchmark) has eased to 4.64% after peaking at 4.75%, making this an attractive time to lock in yields. High-quality bank bonds now offer USD yields above 5.5%, with some close to 6%, near 20-year highs, supported by strong fundamentals and compelling valuations.
Short-Term Cash Opportunity: Enhanced Cash Management (ECM) at 4.25% – A More Efficient Alternative to Bank Deposits
The higher yield curve and wider bank credit spreads create an opportunity to generate a stable net income yield of approximately 4.25%, about 25% higher than traditional bank deposits and roughly 1.0% to 1.5% above prevailing deposit rates. ECM is designed to preserve capital while maintaining liquidity. Further details are available in the “Opportunities” section.
Broad commodity exposure offers diversification, inflation protection, and a hedge against supply shocks, supported by historically low correlation with equities and bonds. Although U.S.-Iran tensions are easing, restoring full flows through the Strait of Hormuz will take time, while geopolitical uncertainty and structural demand from electrification remain supportive. This view is reflected in our Geopolitical Risk Mitigation (GRM) strategy, which includes gold, oil, and copper, three assets increasingly in demand as military and economic conflicts intensify. Further details are available in the “Opportunities” section.
Oil: Tight Supply Keeps Brent Supported
Brent crude rose 20% in July and 60% YTD to USD 82/bbl, after peaking at USD 120/bbl in March, as Middle East tensions and Black Sea disruptions tightened global supply. We expect Middle East production to gradually normalize over the next 12 months, but ongoing conflict should keep energy flows constrained and the market tight. In the near term, supply disruption risks remain skewed to the upside, with Brent potentially retesting USD 90/bbl.
Gold: Recovery Depends on Fed Policy and Central Bank Demand
Gold is down 4.3% YTD to USD 4,273/oz, following a 25% correction from its January record high of USD 5,600/oz, pressured by higher real yields, a stronger U.S. dollar, and reduced expectations for Fed rate cuts. Second-quarter World Gold Council data showed softer investment and jewelry demand, along with slightly higher mine supply, weighing on prices. If the Fed keeps rates unchanged rather than raising them, investment demand should recover, while continued central bank buying would provide additional support for gold prices into year-end.
