On the piste! - Global market update

There is no denying that navigating world markets so far this year has been tough – and probably made worse by the fact that the weather here has been so bad – everything just feels so grey! To provide some form of escape, I have sought refuge in the Winter Olympics, but even here things don’t feel the same. It used to be so much simpler in terms of the various competitions for gold medals – on the ice rink you had figure skating and hockey; the slopes had downhill, slalom and maybe some cross country; there was the bobsleigh and, of course, ski jumping. The only ‘out there’ competition was watching the winter version of bowls, where people slide a big lump of granite down an ice sheet to see whether they can get it to stop on a big target (that is curling for the record!). But now we have things like relay luge, ‘Big Air’ Freestyle and Slopestyle, short course skating and ski mountaineering! Somehow, it’s hard to have the same interest in the Olympics these days when you don’t have a clue about much of it.

Something else that has changed this year – and is similar to what’s currently happening in equity markets – is that the US has lost its dominance on the medal table with Europe being in the ascendancy. Non-US markets are pushing ahead of their US peers, and nowhere is this more evident than in the Technology sector. 

Technology hegemony has long been a feature of the US investment landscape, but has it turned into a bug? For the moment at least, that seems to be the case. The sector has been a long-standing outperformer against the rest of the world for two simple reasons: it has been a cash cow, throwing off enormous profits, and yet still managed to generate substantial growth. Despite the ongoing rally in the broader markets, the Mag 7 have stumbled over the past six months as the investment universe gets a bit of acid reflux from the enormous sums being spent on AI infrastructure, particularly as the monetisation of that outlay seems less than certain.
But this move to look beyond the US does not mean that technology is out of favour everywhere. Performance elsewhere in the world has already attained levels that seem frighteningly unsustainable. The KOSPI is up 35% (!!!) thus far in 2026, and this is unabashedly an AI trade: Samsung and SK Hynix alone have contributed fully half of this epic return. Call it yet another piece of evidence that the big winners in a gold rush are the purveyors of picks and shovels.

What seems evident, though, is that the future of AI and the return on investment are decidedly opaque. For all the propaganda spouted over the benefits of the new technology, recent focus has been much more attuned to the costs — be it the exorbitant outlay on data-centre capex or the collateral damage to firms that may be adversely impacted by the new technology. 
While the tech debate may be hogging much of the headlines in recent weeks, at the same time we have also been in Q4 earnings season – and here the news is a bit more clear-cut. While the percentage of S&P 500 companies reporting positive earnings surprises is below recent averages, the magnitude of earnings surprises is in line with recent averages – in aggregate, companies are reporting earnings that are 7.2% above estimates. As a result, the S&P 500 is now reporting double-digit (year-over-year) earnings growth for the fifth straight quarter at a rate of 13.2%.

Nine of the eleven sectors are reporting year-over-year growth, led by the Information Technology, Industrials and Communication Services sectors. On the other hand, two sectors are reporting a year-over-year decline in earnings: Consumer Discretionary and Energy. 

In terms of revenues, positive surprises reported by companies in the Information Technology, Health Care, Communication Services and Industrials sectors have been the largest contributors to the increase in the overall revenue growth rate for the index, which now stands at 9.0% – marking the highest revenue growth rate reported by the index since Q3 2022 (11.0%). It will also mark the 21st consecutive quarter of revenue growth for the index. Of the eleven sectors, only Energy is reporting year-on-year declines in revenue – not surprising given where the oil price is!

Let’s hope that this turns out to be more ski jump than downhill in the months ahead!