Quarter · Market review
Quarter: energy and rate shocks reached profit expectations
Across 90 days, disruptions and a partial recovery in energy supply changed price expectations. In September the Fed and the European Central Bank raised policy rates, and final August data confirmed higher European inflation. Stronger US sales and fewer benefit claims are offsets, not proof that every company is making more profit.
Period covered: 2026-06-25 – 2026-09-22Information as of 7 min read
Three things changed since the previous cutoff. On 21 September, the US ten-year nominal yield fell to 4.96%, the real yield to 2.62%, and the S&P 500 rose 1.49%. The ECB published evidence that gas-price moves reach consumers faster and that company cost expectations greatly exceed profit expectations. Before 07:00 on 22 September, the Bank of Korea supplied KRW34.00 trillion in 14-day liquidity without cutting its policy rate.
The longer-horizon conclusion is unchanged: a lower yield alone does not guarantee higher equity profit or a safe bond return. Investors still need to separate the real discount rate, inflation compensation, credit quality and a company’s ability to pass on energy and labour costs. Temporary central-bank liquidity is not the same as a recovery in final demand.
Quarter
What happened
The starting point: interest rates had already risen on 17 June
This 90-day period begins on 25 June. Before it began, on 17 June, the European Central Bank’s previously announced interest rate increase took effect. The rate on banks’ overnight deposits rose from 2.00% to 2.25%. These are the initial conditions before the period under review, not a new event within it.
Also on 17 June, the Federal Reserve left the federal funds target range at 3.50–3.75%. It made no change on 29 July. Europe also chose a pause on 23 July. For a business with debt, this meant that energy costs would not be offset by automatically and rapidly falling interest rates.
The starting backdrop: the 18 June agreement had not yet restored shipping
The US–Iran memorandum was presented as a route towards ending hostilities and reopening the Strait of Hormuz. The economic benefit depended on what happened after the signatures: could ships sail safely, would insurance be available, and would oil actually reach buyers?
More reliable deliveries would have reduced importing industries’ need to hold expensive inventories. Hauliers would have found fuel and route planning easier. But the agreement itself was not a statistical record of restored flows. July and August data later required a more cautious assessment of precisely this assumption.
July: the supply recovery was not sustained
The International Energy Agency’s 10 July review described a partial recovery in June flows and ceasefire violations on 7–8 July. Its 12 August report said Persian Gulf oil exports in July, including routes bypassing the strait, averaged 15 million barrels per day. That was 2.1 million, or about 12%, below June.
This comparison describes two monthly averages, not a one-day shipping halt. It showed that June’s hopes had not been enough to deliver a lasting improvement. US military statements on 5 and 8 September about strikes on Iranian tankers were a reminder that delivery security remained unresolved. A particular price move cannot be attributed solely to these statements.
23 July: trade rules and sanctions added to the planning burden
The European Union’s 21st sanctions package against Russia expanded restrictions on energy, financial services and the shadow fleet. For companies, this matters beyond politics: payment, insurance and cargo transport options change. But an announced restriction is not a measured fall in exports of the same size.
On the same day, the Office of the US Trade Representative announced measures concerning 60 economies under Section 301 of the Trade Act. Tariff treatment depended on the product, origin and exemptions. A broad tariff headline was therefore not enough for an importer: the specific supply chain had to be assessed. This legal and logistical burden added conditions that an oil price chart alone cannot show.
Late July and August: the technology transaction had two sides
Demand for technology was visible both in sellers’ revenue and in customers’ investment bills. On 29 July, Microsoft reported capital expenditure, including finance leases, of 41 billion US dollars for the quarter ended 30 June. Cash purchases of property and equipment were 35.8 billion dollars. These amounts must not be added together: the first includes finance leases, while the second shows asset purchases paid for in cash during the quarter.
The company generated 55.4 billion dollars in operating cash flow. Subtracting cash purchases of property and equipment left 19.6 billion dollars. This explains why a rapid pace of construction is not automatically a bad signal: what matters is how much cash the business generates and how much more it needs from outside.
On 26 August, chip designer NVIDIA reported revenue of 96.221 billion dollars for the quarter ended 26 July, up 106% year on year. Operating profit grew 124%. Some customer spending had therefore already become real earnings for the supplier. For customers to earn a return on their investments, however, their new services need demand and must cover equipment, electricity and financing costs.
August and September: growth continued, but costs did not disappear
Economic data showed resilience, not a general halt in growth. The second estimate of US second-quarter gross domestic product showed annualised growth of 1.5%, or about 0.4% quarter on quarter. Euro-area growth was revised to 0.6% quarter on quarter on 7 September. These figures need to be put on the same time basis before comparing the regions.
The US added 162,000 jobs in August; the data were released on 4 September. On 9 September, second-quarter revenue growth in selected US service industries was revised to 3.0% from the previous quarter. This revenue measure has not been adjusted for prices. Rising sales and a greater real volume of services delivered are therefore not the same thing.
9–11 September: the energy question reached monetary policy
On 9 September, the US Energy Information Administration raised its second-half average Brent price forecast to about 90 dollars per barrel. Model inputs were finalised on 3 September. This is a conditional average for a future period, not the oil price on 15 September and not an already measured effect of later military action.
On 10 September, the European Central Bank announced another interest rate increase of 0.25 percentage points. The deposit facility rate rose from 2.25% to 2.50% on 16 September. On 11 September, the US Consumer Price Index showed annual inflation of 3.4% in August, the same as in July. The seasonally adjusted monthly change accelerated from 0.1% to 0.4%. These data are already known and form a new backdrop to the Federal Reserve meeting of 15–16 September.
? How should we read GDP and price indices?
Gross domestic product measures the value of final goods and services produced in an economy. Real growth removes the effect of prices. US quarterly growth is often reported at an annualised rate, as if the same change continued for four quarters. The Consumer Price Index measures a basket of prices weighted by consumption. Its annual and monthly changes have different comparison bases. The Personal Consumption Expenditures Price Index also includes spending made on consumers’ behalf, uses different weights and accounts for changes in the composition of consumption; these two price indices should not be treated as interchangeable.
Mid-September: June’s hopes were not enough to restore supply
The International Energy Agency’s 11 September forecast projected a larger fall in oil supply than in demand this year. This is a forecast, not the final annual result.
Lower demand does not automatically mean cheaper oil. If the volume reaching buyers falls faster, fuel bills can remain high even as the economy slows. This can help an energy producer only if it can deliver its output. For a haulier or an energy-buying factory, the same situation raises costs.
Professional portfolio management
A plan for your portfolio. No rush.
Let’s discuss your goals, risk tolerance and time horizon. Find out how your portfolio would be built and managed.
The first conversation is free, with no obligation.
Quarter
What matters now
The priority now is to separate a friendlier discount rate from profit pressure
On 21 September, the long US yield fell while the two-year rate was unchanged. The ten-year real yield declined slightly more than the nominal yield, leaving implied inflation compensation almost unchanged. The combination is more supportive in the short term for long-duration bonds and equities whose value depends on distant earnings. It does not show that economic or price risk has ended.
The ECB evidence explains the counterweight. A gas-price shock can now reach consumers faster, while companies more often expect higher costs and wages than higher profit. An asset’s rate-sensitive valuation can therefore improve at the same time as some company margins deteriorate. Pricing power, debt maturity and energy intensity matter more than the sector label alone.
South Korea’s KRW34.00 trillion operation illustrates a third channel: financial-system liquidity. It can stabilise short-term funding but does not answer whether final demand is growing. Bond portfolios need to compare duration with credit quality, equity portfolios margin with net debt, and multi-currency portfolios local returns with exchange-rate moves. The opportunity is a lower real return alongside resilient profit; the risk is faster energy pass-through alongside weaker demand.
? Why do the four charts show several channels rather than one forecast?
The curve shows the price of different maturities, the nominal-real gap separates real return from inflation compensation, the energy chart shows pass-through timing, and the company survey shows the direction of expectations. None of them alone forecasts the whole portfolio.
Quarter
What comes next
What to watch
Japan’s new rate guideline takes effect on 24 September. South Korea’s 14-day liquidity operation matures on 6 October. US labour data and a new euro-area inflation estimate due on 2 October will test whether lower real yields can coexist with resilient demand. Actual company margins, rather than survey expectations alone, will change the longer-term conclusion: if profit withstands cost pressure, the friendlier discount rate will have firmer support; if not, the valuation relief may be brief.
Important. This is general market analysis, not a personal recommendation to buy or sell. Historical data and company results do not guarantee future returns. Forecasts and conditional scenarios may not materialise.
How is the history preserved and updated?
All five periods in this edition share one information date. Week means the latest 7 days, quarter means 90 days, and year means the trailing 12 months. The next dated edition will have a separate URL. This text keeps its date and assessment; later events are not silently inserted into an older edition. Longer periods assess new evidence alongside earlier developments without repeating every headline.
