Global Fund Update – August 2026
After a strong first half of 2026, global equities declined 1.1% in Sterling in July with the Goshawk Global Fund falling 0.1%, taking year-to-date gains for the Global Fund to 7.2%.
During US earnings season, company comments around the performance of the economy continue to point to robust performance, and expectations for US GDP growth currently stand at around 2% for 2026. Although US interest rates were left on hold by the Federal Reserve, longer-term bond yields continued to climb as inflation remained persistent. New Fed Chair Kevin Warsh commented that the FOMC has “no tolerance for persistently elevated inflation”, but despite the fact that inflation has now been above the 2% target for over five years, and Mr Warsh has been adamant that this is not a soft target, the Fed still left interest rates unchanged at the July meeting in a 9-3 vote. Nevertheless, market expectations are that rates will move higher in the next few months and the upward movement in bond yields reflects this.
Japanese equities endured a volatile month while the weakness of the Yen against all major currencies has continued, though in early August a major intervention was launched by the US and Japan, leading to a sharp reversal of that weakness.
Stocks & Portfolio Moves
We continue to be strongly overweight Japanese equities and have been reasonably pleased with the results that our holdings have produced so far this results season. The notable exception to this was robotics company Yaskawa Electric, whose results missed expectations, largely down to the implementation of a new ERP system. This has caused a temporary disruption to the business, but this is not uncommon and has not changed the company’s full-year guidance or, more importantly, any of the longer term goals outlined at its recent capital markets presentation. There has been a lot of excitement around physical AI, which we share, and robotics is central to this. As a result, we modestly increased our holding in Yaskawa after the stock fell over 30% post-results, which wiped out all its gains for the year.
On the other hand, factory automation giant Keyence delivered another superb set of results, benefitting from a pickup in the capex cycle in the US and China, and the company even saw some growth in the automotive industry in Japan. We see Keyence as really well-positioned for continued growth and as a beneficiary from continued AI related investments, including data centres and physical AI in the factory environment.
We introduced a new holding to our Japanese portfolio in July, Daikin Industries. Daikin is an HVAC company which is on a path to improving its return on equity via its Fusion 30 strategic plan, targeting a return of 12% by 2028 and over 15% by 2030 by improving margins and capital efficiency. We remain very positive about the prospects for the global HVAC industry, with the continuing heat wave in Europe indicative of increasing structural demand for the residential sector and the explosive growth in capex plans of the hyperscalers generating a considerable tail wind for the non-residential side of the business.
The hyperscalers continue to report very strong demand growth for data centre capacity as investment in AI accelerates. Historically, companies like Alphabet, Amazon, Meta Platforms and Microsoft all operated as capital-light, highly cash generative businesses, which helped drive very strong free cash flow. However, as capex plans have climbed exponentially in recent quarters, cash flows have been materially diminished, leading Alphabet, which we still own, to raise equity in May. All four of these firms continued to report strong revenue growth when they released earnings in late July, but share price performance was mixed.
As noted, we continue to own Alphabet along with Amazon, but are constantly reviewing these positions as the landscape for AI investment is evolving all the time. After a poor recent run, Amazon shares rallied 15% on the day of its results after reporting phenomenal growth in its AWS cloud division and an improvement in operating margins that relieved the market. Management also sought to reassure investors that the return on invested capital of its colossal capex will ultimately generate an acceptable return as AWS revenues potentially reach as much as $1trillion. However, the company no longer generates any free cash flow and is looking at ways of raising additional capital. We are reviewing our position in the companies we still own in this space.
We remain uncertain as to the ultimate returns generated by the investment currently pouring into the AI industry, whether it be from data centre spending or in semiconductors. However, two areas that we see as clear winners from the investment are the power and electrification related sectors, which are beneficiaries of the increasing need for more energy. Even before we saw this explosion in data centre demand, we were firm believers in the opportunities for companies like Schneider Electric, which is a major beneficiary of increased electrification of the world’s energy infrastructure. In July, Schneider produced a superb set of results with organic revenue growth of 17%, even faster growth in energy management and accelerating growth in industrial automation. Unlike the hyperscalers discussed earlier, this strong revenue growth was matched by equally strong improvement in profitability, as margins expanded and free cash flow grew to €1.6billion for the first six months of the year. Shares in the company rose significantly on the day of results and are up 25% year-to-date.
In the gas sector, EQT also produced an excellent set of results, pushing its shares over 8% higher on the day after a quiet period of performance. Results revealed strong demand for natural gas, with sales and production above the high end of guidance and excellent control of operating costs and capex combined with improving margins and cash flow. This enabled the company to raise full-year targets and issue positive commentary around its long-term prospects, and the signing of lucrative multi-year agreements with both domestic power generators and an Asian integrated energy company has increased our confidence in EQT’s prospects.
We have significant exposure to the growing demand for energy in multiple areas, including both EQT and Schneider but also Rolls-Royce, uranium company Cameco and oil & gas companies such as Equinor and Canadian pipeline company Pembina, which also reported a solid set of results in July. We see Pembina as a major beneficiary of material policy improvements from the Canadian government, which has reversed course on energy infrastructure and is now committing to material investment from which Pembina should be a major beneficiary.
Outlook
The portfolio continues to offer a balanced approach to the market and currently has around 7% cash, for which we see a large number of potential opportunities in many sectors.
The combination of persistent inflation and concerns about the financing of AI has made bond investors more cautious in recent weeks, while equity markets have generally held their levels, supported by a strong results season. If inflation levels persist, especially gasoline prices in the USA, the upward pressure on interest rates will continue. The positioning of the Goshawk portfolios has these issues in mind. Our core holdings have good valuation support, our exposure in technology is towards robotics and not AI and we have balance against inflation by holding oil & gas shares, which many funds currently seem to avoid.
We suspect the remainder of the year could be quite tricky, especially as gains have come quite easily so far, so our priority is holding onto those gains.
Goshawk Asset Management
Data source: Goshawk Asset Management, Bloomberg
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