Great reports from Nvidia and Salesforce.com take 2Q26 earnings growth to over 33%; a hawkish speech from Chairman Warsh in Jackson Hole brings back with urgency the possibility of a hike in September or October. The S&P 500’s multiple is below 20x (19.6x), but all eyes are on inflation, rates, and sovereign yields, so watch Friday’s labour report with great attention. Renewed hostilities between the US and Iran bring Brent over $90. The biggest tail risks are the US Economy falling into a recession (15% chance in the next 12 months), resurging inflation, revenues/earnings/guidance not matching forecasts, a surge in long bond yields coupled with a USD crash, followed by damages done by tariffs/government policies, adverse geopolitical outcomes, and valuations (high multiples).

Major market events 31st August – 4th September 2026

Economic data highlights of the week

Mon: UK – Holiday, JP Industrial Production (7/26), CN Manufacturing PMI (8/26), IN GDP (1Q26), DE CPI (8/26), US Chicago PMI (8/26)

Tue: JP Capital Spending (2Q26), CN Caixin Manufacturing PMI (8/26), DE Retail Sales (7/26), FR Manufacturing PMI (8/26), DE Manufacturing PMI (8/26), EU Manufacturing PMI (8/26), UK Manufacturing PMI (8/26), EU CPI (8/26), EU Unemployment Rate (7/26), US Manufacturing PMI (8/26), US ISM Manufacturing PMI (8/26), US JOLTS Job Openings (7/26), US Atlanta Fed GDPNow (3Q26)

Wed: AU GDP (2Q26), US ADP Nonfarm Employment Change (8/26), CA BoC Interest Rate Decision, US Beige Book

Thu: CH CPI (8/26), CH GDP (2Q26), FR Services PMI (8/26), DE Services PMI (8/26), EU Services PMI (8/26), UK Services PMI (8/26), EU PPI (7/26), US Nonfarm Productivity (2Q26), US Initial Jobless Claims, US Services PMI (8/26), US ISM Non-Manufacturing PMI (8/26), US Fed’s Balance Sheet 

Fri: UK Construction PMI (8/26), UK BoE Governor Bailey Speaks, US Nonfarm Payrolls (8/26), US Average Hourly Earnings (8/26), US Unemployment Rate (8/26)

Performance Review

Source: Google

InflectionPoint reports:

* Last week, Nvidia and Salesforce.com reported great results, and Chairman Warsh delivered a hawkish speech at the Jackson Hole symposium. The Core PCE Price Index, the Fed’s favourite measure of inflation, was in-line, and this perhaps will not be enough to prevent the US Central Bank to hike soon. To be true, there are still the August labour report this week, and one more CPI, but the emphasis that was put on restoring inflation to 2% will weight on future choices, no matter what the data will depict. It is becoming clearer that, at this point in time, the dual mandate of price stability and full employment is heavily tilted towards the former, and this brought the market to reprice risk. August has been a positive month so far, but without the results that outstanding earnings and a somewhat compressed multiple would have deserved. And so comes September, usually a very tricky (=negative) month for global equities. My personal sense is that investors will be wary of increasing risk until there is more clarity on how high will sovereign yields go, with some expecting that the 10-year Treasury will top 5%. The conflict in the Middle East remains messy, with Secretary Bessent’s plan to strangle Iran’s economy making its debut, at the time purported discussions are ongoing between Iran and Oman in order to reopen the Strait, with President Trump unwilling to return to the terms of the previous agreement. Brent declined slightly to $88, remaining fully in the $80-$90 interval that Goldman Sachs forecasted, with upside if there is a deal, and downside in case of a further escalation. No matter how you look at them, yields are rising everywhere, often to a level never seen before, sending bonds crashing. Last week yields were relatively stable, but this is going to be an issue in the future, particularly as Governments try to lower their interest rate costs. This is a problem to which the current oil crisis due to the war in the Gulf definitely contributed, but it is also a function of recurring inflation. While in September there is still a chance that a weak August labour report may prevent the Fed from hiking, it gets way more difficult in October or December, when such a move will become almost certain (88.9%), with the possibility of more than 25bp increase during that timeframe. The next FOMC meeting will be in little more than 2 weeks, and the expectations of a hike in September have climbed to 57%, according to the CME FedWatch Tool. The S&P 500 has declined to 19.6x last week, putting it below with the 5-year average of 19.9x, albeit with the exception of superior earnings growth at present. Recently, there was a massive joint US-Japan intervention to prop up the weak Yen, but such intervention largely failed, with most investors pointing at the BoJ as the still missing link. Recently the government said that it approves a hike soon, and one might well follow in September or October, but if it’s just another 25bp, it might be a case for ‘too little, too late’. Already there are academics who think that the top might be at or above 2% to rein in inflation. As long as Japan’s Central Bank continues to be seen as behind the curve, the JPY’s devaluation is inevitable, no matter what kind of intervention Tokyo and Washington might stage.  The lesson from the dot.com boom (and crash) is: watch the profits. With capex ever rising even for the largest companies, investors keep checking whether there are sound returns on their investments, with virtuous companies rewarded and those less so sidelined. I continue to remain optimistic on earnings and on the continued climb of the leading US Indexes, barring major shocks from policy, inflation, and geopolitics. Anthropic might become public as soon as this October, with a $2 Tn valuation. and wants to raise $10 Bn in debt before the IPO. The new issues from hyperscalers are giving sovereigns a run for their yields, unfortunately, and dominating the attention of market pundits. The present 2026 target for the S&P 500 is 8,000 for Ben Snider of Goldman Sachs, underpinned by a 24% growth in earnings to $340 for 2026, a massive upgrade from $309 previously, and more in line with FactSet bottom line calculations. He foresees the leading US Index rising to 8,800 by the end of 2027, and he’s not even the most bullish strategist on the street, as usual bears Morgan Stanley, and Yardeni Research have a target of 8,300 by the end of the current year. The forecast for 2027 EPS is $385, and the FactSet bottom up forecast is just shy of $415, making another upgrade likely at some point if the positive trend continues. I am aware that we are getting close to the top, but if I use a multiple (21x) lower than the one Snider used in his forecast (22.85x), with these earnings I’m getting fairly easily to a target of 8,500 by the end of this year. And we have just seen two quarters of spectacular earnings; while the fourth will fall within 2027, there is still one quarter (3Q26) to go. I’m still keeping equities to buy (with the famous 3% weekly stop), keeping US bonds to hold, and keeping European bonds to buy (with the notable exception of France). Valuations matter: Japan has really impressed with its performance under new PM Sanae Takaichi, and it would be well worth considering to include the Asian country in portfolios, but I still recommend hedging the JPY. I still believe that the interventions, however massive, cannot be a long term solution unless the Bank of Japan significantly hikes its 1% rate. PM Takaichi recently put forward a bill that would cut tax on food to 1% from 8% from 1 April 2027, for a duration of 2 years, as a temporary fix for the cost-of-living crisis PM Burnham is so desperate to tackle in the UK. Bond yields have been creeping up, sometimes dangerously, on expectations of a move of the BoJ to bring interest rates beyond 1%. Any case it goes, it’s a ‘brave new world’ for Japan, as the last 30 years of policy and deflation/low inflation are completely wiped out. Finally, a word on Italy, whose FTSE MIB Index managed to grow above 50,000 points, a target set in the fateful 2000. While overall growth remains slow, companies are faring much better, thanks to markets diversification, and are bringing the Italian know-how to the world. I am expecting this positive trend to continue, and certainly to outperform the broader Euro Stoxx 50 index. It’s been a good couple of years, but the party’s not over (yet).

* After a 2Q26 growth of 1.5%, GDP forecasts for 3Q26 are good, with the Atlanta and New York in agreement on a positive direction. The current P/E ratio of 19.6x is below the average P/E ratio of the last 5 years at 19.9x, but above the 10-year average at 19.0x. As the multiple held throughout 2025, I believe that it should hold over the next 12 months, if the economy performs similarly and there are no major geopolitical displacements; it is the same assumption I had back in 1999, when the multiple was 24x. That multiple level lasted for the good part of almost two years, and despite the fall in 1H00, technology stayed strong through the summer, until the Intel preannouncement in September sealed their demise and gave way to 2 years of bear market. One of the major differences of the current cycles relative to the dot.com boom is that then many companies were thriving on expectations of future sales and no earnings, now companies, even start-ups (Palantir did raise to the challenge with an accelerating 19% quarter on quarter revenue growth, up from 16% in 1Q26) do have tangible revenues and earnings, so the market is on a much sounder footing now than then. Furthermore, back then the Fed was hiking rates, and had reached the peak by the end of 2000, with the famous out-of-meeting jumbo cut on January 3, 2001, in response to the rapid deterioration of the economy due to the dot.com crash. A very influential voice, such as that of Goldman Sachs’ CEO David Solomon, said that AI will lead to opportunities, as well as inevitable job losses, and was painting a rosier picture of this new technology. After the Space X listing, OpenAI, and Anthropic are in a pre-IPO phase, and a success of two of the most hyped companies ever is important to lead the markets higher.  

*  The Federal Reserve was on hold at the end of July, and kept the rate to 3.50-3.75%, albeit with three dissenters who would have preferred a 25bp hike. It is now expected that the FOMC, under the guidance of new Chairman Kevin Warsh, will raise rates soon, which is understandable given the strength of the US economy and the threat of inflation. Even though Goldman Sachs and Morgan Stanley call for no rate hikes this year, I still think that a 25bp hike wouldn’t necessarily derail the positive trend so far. I wonder if all this growth we are seeing in 2026 so far has been the result of the Fed’s decision to lower rates by 175bp in the last two years. We need (lower) yields and (higher) earnings to support some of the highest multiples since my heyday (the fated 1999-2000), but it is increasingly difficult to get these in the US. You can look forward to these in Europe to some extent, albeit because the economy’s growth path is much more shallow than across the pond. 

* Yields on US 10-year Treasuries have reached 4.72%, and were stable last week, in line with most European government bond yields. While in 1999 they were even higher, and the Fed was hiking, not easing, we definitely need yields to return below 4% to have a more constructive scenario, albeit gradually and not through a crash. We seem to be on a struggle to get there; and on top of this I cannot yet recommend the US Debt on their public spending plans. Legendary investor Jeffrey Gundlach said that there might even be a haircut on US Treasuries, which never happened before. The potential opening of a sovereign crisis is something that must absolutely avoided. The US Deficit is currently about 6% of GDP and neither the Republicans nor the Democrats want to reduce it. Higher borrowing costs will be felt across the balance sheets of most states, potentially further reducing growth. Regarding earnings, I continue to remain optimistic, particularly on technology (the main driver for the S&P 500). Ben Snider, who has taken up his post as Chief US Equity Strategist from legend David Kostin, has a bullish forecast of $340 per share for the S&P 500 by the end of the year, with a target price of 8,000, and $375 for 2027, with a target price of 8,800. At the moment, the bottom-up forecasts are well ahead of both his 2026 and 2027 targets. Earnings for 2026 are continuing to rise to a level of $361.24 per share, while for 2027 they are seen at $414.75 (significantly ahead of GS’ own forecast at $385). In both cases, the earnings’ progression puts both of them on a significantly higher level than just one year ago. These could be revised even higher should 3Q26 earnings impress and beat forecasts once again.

Source: FactSet

* The US GDP for 2Q25 came in at 1.5% according to the latest estimate. The Atlanta Fed GDPNow model forecast for 3Q26 is in positive territory, with a current reading of 4.6%, up from 4.0% last week. It is well above the Blue Chips consensus, which are presently at 2.5% and raising. Last quarter, the Atlanta Fed’s model was the one closest to the actual GDP results. The New York Fed’s Nowcast model, which is less volatile, has its current forecast is 2.22%, down from 2.27% last week. I believe it is prudent to make an average of those two forecasts to get to the real number. Introducing a forecast for 2Q26, with earnings expected to climb by 33.8% (excluding Alphabet and Amazon’s outsized gains), compared with a forecast of 23.1% as of June 3oth, with revenue growing by 15.5% vs 12.2% as of June 30th. It is very important to note that analysts have been increasing numbers for 2Q26, even after the impact of the war. For 2026, earnings growth is forecasted at 31.2% vs 23.8% as of June 30th, with revenue coming in at 11.9% vs 10.8% as of June 30th. Introducing a new forecast for 2027, earnings growth is forecasted at 14.7% vs 17.4% as of June 30th, with revenues coming in at 8.9% vs 8.1% as of June 30th. I wouldn’t worry about the deterioration in earnings at the moment: it’s such a long time away and it can be revised upwards as US corporates continue to deliver. Finally, it’s worth noting that the chance of a recession in the next 12 months, as calculated from the yield curve, according to the Federal Reserve Bank of Cleveland, is presently (July 2027) 12.27%. The peak was 68.76% in April 2024, and it was the only time since 1960 in which a recession did not materialise, given such a forecast. The current level is below economists’ current forecasts: a 15% chance of a recession in the next 12 months.  

Source: Blue Chip Economic Indicators and Blue Chip Financial Forecasts; Federal Reserve Bank of Atlanta

Source: Federal Reserve Bank of New York, New York Fed Staff Nowcast

Source: Federal Reserve Board, Federal Reserve Bank of Cleveland, Haver Analytics

Earnings, What’s Next?

The reporting season for 2Q26 is now ending. Here’s a list of companies reporting this week. Highlights: Broadcom (Wednesday, After Close). 

Source: Earnings Whispers

Market Considerations

Source: Bloomberg, Goldman Sachs Global Investment Research, ISABELNET.com

Source: Goldman Sachs FICC & Equities/US Portfolio Strategy, ISABELNET.com

Source: Carson Investment Research, Ryan Detrick, ISABELNET.com

Revenue growth estimates for 2026 are forecasted to grow by 11.9% (10.8% on June 30th), and earnings growth estimates for 2026 are predicted to grow by 31.2% (23.8% on June 30th), so the future looks bright. Introducing forecasts for 2027, which sound again very positive, with revenue to grow by 8.9% (8.1% on June 30th) and earnings to grow by 14.7% (17.4% on June 30th). As mentioned, the Fed has cut its rates by 100bp in 2024 and 75bp in 2025. It should have continued to ease were it not for the spike in inflation generated by the war in Iran. While the price of oil had eased, it did come back, and it is too soon to say if the spike in inflation will be transitory or permanent. 

Three highlights this week. The first chart, from Goldman Sachs, shows that according to the leading investment bank, the US economy can continue to grow steady as it goes. Their forecast for real 2027 growth is ahead of consensus. The second chart, again from Goldman Sachs, posts a very interesting development: since the start of the US/Iran war, 2026 estimates for the S&P 500 earnings have increased by 16%. Corporate America ignored the event and continued to invest and grow as if nothing had happened. The third chart, from Carson Investment Research, shows that we should expect a 5% rally from here to the end of the year, with a 90% confidence. We have to contend with a tricky September and the midterm elections, but the future seems positive. 

For equities, be careful not to fall into ‘Buffett’s trap’. He famously said that there were moments when Berkshire Hathaway’s stock was down more than 50%, and nothing was wrong with the company at the same time. Timing and risk management are key. I remain optimistic in the long term; I have faith in the new CEO, but to follow the Oracle means filling very, very big shoes. It appears, however, that the legendary Chairman is still providing his ideas, particularly when trading stocks: the $10 Bn position in Alphabet was his idea. The late Angelo Abbondio, a legendary Italian investor, used to say that you can rely on fundamental analysis and on technical analysis, but the most difficult thing was to decide when to prioritise the first and when the second. In general, no stock can outperform all the time; some volatility has to be expected. Those who performed better earlier may not perform so well later.

Due to the persistent stickiness of inflation, monetary policy is again taking centre stage. Obviously, we should not overlook geopolitical scenarios in Ukraine and the Middle East: this will dominate the news for a while. Any further escalation would be negative for the markets.  

I now recommend a long position in equities and a neutral position on US bonds. For EU Bonds, I advise going long (with the notable exception of France), while I still suggest putting together a portfolio that focuses on the safety of German Bunds, which are to be preferred in my view, given increased yields. While the spreads in Europe have widened as a result of the war and consequential flight to quality, I can still find value in 10-year German bunds with a yield around 3%. 

There are four main headline risks to what is otherwise a constructive view for 2026: i) revenue/earnings/guidance not matching forecasts, particularly in technology; ii) any damage to the economy and trade done from Trumponomics, tariffs, increasing sovereign yields, and resurging inflation; iii) any negative geopolitical outcome (which could see an expansion of the current conflicts); and iv) valuations, which are nearing levels only seen once before (at least during my lifetime!). 

Japan continues to lead major global markets with a great performance YTD. The Bank of Japan is in a very tricky position, like the Fed was not so long ago. It would need to raise rates to counter inflation, but the weak growth may prevent it to do so. That might turn in a further weakening of the JPY. Watch out the long bond yields, particularly the 30y and 40y, as they react to increased government spending. I am now very positive on the country, although I would definitely hedge the JPY. While the BOJ raised rates to 1% in June, the highest level in 31 years, it is seen as behind the curve, which is why – barring interventions – the JPY is continuing to fall, especially vs the USD. There are already signs that the latest, massive intervention orchestrated by Japan with the US might fail, as the JPY is already losing some of the ground it gained because of it. Let’s see if there is any change in the message when the BOJ will raise rates again in September or October.

Portfolios

Finally, I want to introduce four portfolios that Tom and I published on Wikifolio. Tom’s a multi-asset portfolio, whereas the one I manage (with substantial input from Tom) is a global income and growth with a heavy US tilt. The third one is on Italian Equities. The fourth and latest one is on Japanese Equities. Check them out!

https://www.wikifolio.com/en/int/w/wf00inf8ig

Tom’s Multi-Asset Portfolio is up 34.4% in 2 1/2 years, with a Sharpe Ratio of 1.2

https://www.wikifolio.com/en/int/w/wf000ipggi

Our Global Income and Growth Portfolio is up 42.4% in 2 1/2 years, with a Sharpe Ratio of 0.7. Obviously, the devaluation of the USD had a big impact as all stocks are priced in EUR

https://www.wikifolio.com/en/int/w/wf00ipiteq

My Italian Equities Portfolio is up 89.5% in 2 years+ and has outperformed the FTSE MIB Index by 2780+ bp in this timeframe, with a Sharpe Ratio of 1.7

https://www.wikifolio.com/en/int/w/wf00ipjpeq 

My Japanese Equities Portfolio is up 8.9% in about 6 months. Obviously, the devaluation of the JPY had a big impact as all stocks are priced in EUR.

Consulting

Finally, I have officially become an Italian Independent Financial Consultant (Consulente Finanziario Autonomo), registered with the Italian OCF since 19 March 2024 (protocol 2425). If you are interested in my financial advice or simply for more information, please contact me at gvintani@gmail.com

Consulting accounts usually start from EUR 100,000. Please note that you should be based in Italy to avail yourself of this service. If you are interested, please feel free to drop me an email. I am happy to send you my presentation and track record upon request.

Happy trading, and see you next week!

InflectionPoint

Disclaimer

All views expressed on this site are my own and do not represent the opinions of any entity with which I have been, am now, or will be affiliated. I assume no responsibility for any errors or omissions in the content of this site, and there is no guarantee for completeness or accuracy. The content is food for thought, and it is not meant to be a solicitation to trade or invest. Readers should perform their own investment analysis and research and/or seek the advice of a licensed professional with direct knowledge of the reader’s specific risk profile characteristics.