Market Update – 11th August 2026

Flying high

We try not to buy into the quarter-to-quarter short-termism that some traders live and die by. One swallow doesn’t make a summer, and one blip doesn’t mean the beginning of a new negative trend. That said, it is of course worth checking in on companies to see how things are going.

I wrote a piece a few weeks ago which touched on how analysts were expecting a bumper year. As part of that, forecasts ahead of the second quarter were reasonably high. Optimism is an encouraging thing to see, but a bird in hand is worth two in the bush. Encouragingly, with the large majority of results posted, the numbers we have seen have been excellent.

At the start of the quarter, forecasts were for the US market to report revenues something like 9 or 10% ahead of last year. Revenue growth is actually tracking at around 15%. It has been the same story as far as earnings go. The large majority of companies have exceeded forecasts, leading second quarter earnings to shoot up by around 30%, even after excluding some one-off gains at a couple of the big tech names. We saw similar growth coming out of the pandemic, but that was an exceptional time with progress coming from a seriously depressed base. To get results like these on top of the growth we saw last year is rarer than hen’s teeth. This goes a long way to explain why the market is flying high.

Perhaps the most encouraging thing is that it is a genuinely broad-based performance. Sure, the tech and oil sectors are leading the way, but all 11 sectors in the US market have seen revenue rise, with 8 of these following through with double digit earnings growth. The eagle-eyed among you will have noticed that these figures are limited in that they are market-wide and not specific to what we cover. I ran the numbers from our buy and hold lists, and can confirm that momentum is strong in these holdings too. Earnings forecasts for the year are 8% higher than they were at the start of the year, with the majority of that uplift coming since the start of Q2. It is much the same story for dividends too.

We are particularly encouraged that these upgrades have not brought about more demanding multiples. In contrast, the valuation attached to stocks in our coverage has, on average, reduced over 2026. This is consistent with the main UK and US indices too.

It is also good to see leverage ratios below long-term averages in both the UK and US, as well as on our lists. Balance sheet metrics can be overlooked when the going is good, but when the tide turns debt ratios come sharply back into focus. Picking stocks without excess debt remains a key principle for us.

With many companies offering higher than expected profits and dividends, at lower valuations and with more balance sheet security, we feel the equity markets remains an attractive place to look for those looking to build a good nest egg. Of course, we live in uncertain times, and there remains a long list of potential macroeconomic and geopolitical tripwires.

With that in mind, while we are certainly confident about long-term prospects and very happy with what we’ve seen so far this year, we remain mindful of the possibility of short-term volatility.

George Salmon – Senior Research Analyst

Hawksmoor Investment Management Limited is authorised and regulated by the Financial Conduct Authority (www.fca.org.uk) with its registered office at 2nd Floor Stratus House, Emperor Way, Exeter Business Park, Exeter, Devon EX1 3QS. This document does not constitute an offer or invitation to any person in respect of the securities or funds described, nor should its content be interpreted as investment or tax advice for which you should consult your independent financial adviser and or accountant. The information and opinions it contains have been compiled or arrived at from sources believed to be reliable at the time and are given in good faith, but no representation is made as to their accuracy, completeness or correctness. The editorial content is the personal opinion of George Salmon. Other opinions expressed in this document, whether in general or both on the performance of individual securities and in a wider economic context, represent the views of Hawksmoor at the time of preparation and may be subject to change. Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested. Currency exchange rates may affect the value of investments. FPC26747.