Quarterly Insights – Q2 2026
- Q2 demonstrated how quickly markets can move between regimes. AI productivity supported the Deflationary Boom, infrastructure and defence spending strengthened the Inflationary Boom, the energy shock briefly created an Inflationary Bust, and rising financial leverage remains the most likely path into a Deflationary Bust.
- The old ESG has been replaced by a new ESG: Energy, Security and Geopolitics. Energy is now the physical foundation of AI, industrial competitiveness and sovereignty; security now includes grids, cyber networks, semiconductors and supply chains; and geopolitics increasingly determines where and at what cost capital can flow.
- AI is both the great productivity hope and the great financing risk. The promise of digital abundance is real, but delivering it requires an enormous physical build-out in energy, data centres, chips and grids — increasingly funded through debt, equity issuance and financial leverage.
- The Fiscal Age is making inflation more volatile, not necessarily permanently higher. One supply shock changes the price level; repeated shocks, combined with fiscal accommodation and rising deficits, risk changing the inflation regime itself.
- Portfolio construction must respect regime uncertainty. The Permanent Portfolio is not a forecast that all assets rise together; it is a recognition that leverage can finance extraordinary progress while making regime transitions violent, nonlinear and impossible to time.
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Disclaimer:
This document is provided for information purposes only and is intend for confidential and sole use by the recipient. It is not to be reproduced, copied or made available to others. The information set out in this document does not constitute investment advice or a personal recommendation. The views expressed in this document are not intended as an offer or a solicitation, to purchase or sell any security or other financial instrument, credit or lending product or to engage in any investment activity.
Past performance is not a guide to future performance. It is important that you understand that with investments, your capital is at risk. The value of investments, as well as the income derived from them, can go down as well as up and investors may get back less than the original amount invested. It is your responsibility to ensure that you make an informed decision about whether to invest with us, based on your particular objectives. If you are still unsure if investing is right for you, please seek independent advice.
The information and opinions expressed within this document are the views of (the company) and are based on information we believe to be reliable, but we do not represent that they are accurate or complete, and they should not be relied upon as such. Any information provided is given in good faith but is subject to change without notice.
No liability is accepted whatsoever by (the company) or its employees and associated companies for any direct or consequential loss arising from this document.