Market Insights August 17, 2026

China turns to equity markets to finance its future champions 

China is increasingly turning to capital markets to support the development of its strategically important companies. Sectors deemed a priority, such as semiconductors and robotics, which have historically relied heavily on government support, are now benefiting from easier access to initial public offerings. The objective is clear: to mobilise the country’s vast pool of domestic savings to finance innovation and strengthen China’s technological self-reliance.

This shift was recently illustrated by the IPO of CXMT, a Chinese memory-chip manufacturer. The offering generated spectacular investor enthusiasm, with the shares surging by several hundred percent in the first few days of trading. The next major event is expected to be the listing of Unitree, a specialist in humanoid robotics. Investor appetite is already exceptional: the tranche reserved for retail investors is reportedly more than 5’500 times oversubscribed.

While China is seeking to draw inspiration from the US model of financing innovation through capital markets, we remain mindful of valuation levels, which in some cases appear disconnected from underlying economic fundamentals.

United States: risk of turbulence

Recent weeks have been particularly favourable for equity markets, especially in the United States. The beginning of the summer was marked by concerns over a potential tightening of Federal Reserve monetary policy and doubts about the tangible impact of Artificial Intelligence on the economy. The protracted conflict in the Middle East, volatility in energy prices and the resulting pressure on household purchasing power also appeared to be weighing on investor sentiment.

The second-quarter earnings season has largely dispelled these concerns. The exceptional resilience of the US economy is increasingly difficult to ignore. The overwhelming majority of S&P 500 companies, more than 90%, to be precise, have exceeded analysts’ expectations, and by a substantial margin. The strength of earnings has been broad-based, with all sectors seemingly benefiting from a robust economy and improving productivity, supported by the deployment of AI tools.

Following these results, growth forecasts for the current year have been revised significantly higher. In 2026, US earnings are expected to rise by more than 30%. While this figure is already impressive, there is a strong likelihood that it will be revised further upwards in the coming months.

Against this backdrop, Kevin Warsh’s hesitation appears relatively secondary. With growth momentum this strong, one or two isolated increases in the Federal Reserve’s policy rate would likely be absorbed by equity markets without significant difficulty. The compression in valuation multiples that typically accompanies upward adjustments in interest rates has already taken place and has gone largely unnoticed by investors. P/E multiples contracted by 15%, more than offset by earnings growth of over 44% in the second quarter.

Can equity indices therefore continue to advance at this pace through year-end? While we expect new record highs in the coming months, we would also highlight a significant risk of higher volatility over the medium term. Sentiment indicators are beginning to point to a degree of complacency amongst investors. First, there is complacency regarding the unresolved conflict in the Middle East, which is likely to continue weighing on consumers’ purchasing power. There is also complacency as the US midterm elections draw closer, a period that could prove conducive to a temporary equity-market correction. Finally, it is worth noting that, over the past ten years, September has on average been the weakest month of the year.

While the outlook for the US economy remains decidedly positive, we recommend patience to investors seeking to increase their exposure to the region. More attractive entry points may emerge over the coming weeks.

This week’s figure: 15%

European earnings growth reached 15% YoY in the first half of the year, marking the strongest earnings season in three years. Beyond the significant contribution from commodities, momentum has been broad-based, supported by improving margins, stronger bank profitability, share buybacks and major structural investment themes, notably AI and electrification.