Global Macro Quarterly Outlook
August 2026*
Balancing Strong Fundamentals with Uncertainty and Volatility
- Global growth remains supportive of risk assets, underpinned by improving manufacturing activity, resilient earnings revisions and continued AI-related capex. While inflation and Fed uncertainty have increased, our base case remains one of continued expansion.
- We remain overweight equities and commodities, favouring AI-linked sectors, metals and selected non-US markets.
- Across other asset classes, we remain neutral on duration and investment-grade credit, underweight high yield credit, and retain a weaker medium-term USD view.
The Global Markets Quarterly (GMQ) Outlook is a new publication highlighting the Macro Strategy team’s top-down research and current views on global markets. It replaces our previous Cross-Asset Quarterly and Developed Market Quarterly publications. The GMQ also expands our coverage to include ACWI sector research, alternative assets, and thematic baskets. Our current views are summarised in the allocation table on page 6 of the full report available for download below.
Global Outlook
Our characterisation of the global macro environment for the second half of 2026 is one of improving fundamentals alongside rising uncertainty and risks. Our cyclical indicators continue to support pro-cyclical exposure: global manufacturing surveys are improving (see Chart 1), Asian export data remain robust, global earnings revisions are positive, and US hyperscaler capex remains a tailwind (see Chart 2). Many of these indicators are closely linked to the AI investment cycle, and we therefore continue to favour exposure to the AI hardware supply chain and associated commodities.
While we view AI as a structural theme that remains supportive of the hardware supply chain, growing risks and uncertainties require careful monitoring. The most prominent risk is the sustainability of the AI capex cycle. Growth in large-scale capex spending will eventually slow, a concern frequently highlighted in market commentary and reflected in declining forward multiples (see Chart 3). The main market risk is not whether AI capex growth will slow (it will eventually), but when and how quickly. Our current assessment is that capex spending and demand for AI-related products continue to grow and remain supportive of earnings growth in 2026.
Chart 1: Global Cyclical Indicators
Source: Bloomberg
Chart 2: US Hyperscaler Trailing 12m Capex ($bn)
Source: Bloomberg
*The publication reflects asset performance up to July 31, 2026, and macro events and data releases up to August 11, 2026, unless indicated otherwise.
The information contained herein is obtained from sources believed by City of London Investment Management Company Limited to be accurate and reliable. No responsibility can be accepted under any circumstances for errors of fact or omission. Any forward looking statements or forecasts are based on assumptions and actual results may vary from any such statements or forecasts.