Grizzle

Author: Chris Wood The stress test of the new Fed chairman is under way with the clear break of the 4.5% level on the US 10-year Treasury bond yield in recent weeks though bond volatility, as measured by the MOVE index, remains relatively low.

The stress test of the new Fed chairman is under way with the clear break of the 4.5% level on the US 10-year Treasury bond yield in recent weeks though bond volatility, as measured by the MOVE index, remains relatively low.

If the AI theme has continued to dominate price action in world stock markets, the American economy’s dependence on AI capex has been reconfirmed with the second quarter GDP data. US real AI-related capex, measured as nonresidential private fixed investment in information processing equipment, software and data center construction, contributed 1.01ppts or 48% to US real GDP growth of 2.1% YoY in 2Q26.

The hyperscalers have now reported after the SOX index suffered a 21% decline in July, with Micron down 41% from peak to trough. But the AI capex remains ongoing with the market now expecting capex of about US$860bn this year by the major AI-related US tech players and another US$1.15tn next year depending on the number of tech companies included in the aggregate. Those figures are based on the five major hyperscalers and neoclouds CoreWeave and Nebius.

The setup for gold and gold equities has significantly improved over the last two weeks. Rate expectations have fallen, with a September hike priced in at 72% on July 31st - the July payroll miss and in-line CPI print have since flipped the market to expecting a hold. Inflation expectations remain stable, with the 5y5y forward inflation expectation at 2.29%, inline with the 5-year average.

China, accounting for 20% of the export of world manufactured goods and around 30% of world manufacturing output (value-added), has no interest in a protracted conflict in the Middle East in pure economic terms. It is the case that China, prior to the conflict, was obtaining about 40% of its crude oil and 30% of its LNG imports from the Middle East. Still, China is clearly far better positioned than the US as regards strategic oil reserves.

Author: Chris Wood China, accounting for 20% of the export of world manufactured goods and around 30% of world manufacturing output (value-added), has no interest in a protracted conflict in the Middle East in pure economic terms. It is the case that China, prior to the conflict, was obtaining about 40% of its crude oil and 30% of its LNG imports from the Middle East. Still, China is clearly far better positioned than the US as regards strategic oil reserves.

It remains surprising the degree to which markets have remained calm since the original US-Israel attack on Iran on 28 February. The VIX has peaked at only 35.3 so far in this Iran-war-triggered cycle, compared with a peak of 60.1 following the tariff announcement in April last year, and is now 18.6. Still, the risk of renewed Iran-triggered market turmoil is clearly rising though experience has shown that yet another Trump U-turn can happen at any time.

The Grizzle Growth ETF (DARP) returned 32.88% in the first half of 2026, more than triple the S&P 500’s 10.21%. That performance places the fund in the 3rd percentile of the Morningstar US Large Cap Growth Category* YTD, and in the 3rd percentile on a trailing three-year basis, with a three-year annualized return of 35.07%. Consistency across the one-year and three-year windows reflects the durability of the process, not a single strong quarter. That process was tested early in the year.

Financial markets continue to ignore continuing historical geopolitical developments and maintain a near all-consuming focus on AI. As estimates for AI capex soar, the key issue remains when investors start to worry about the returns or the lack of them from all this spending with the next test the forthcoming earnings seasons.