WS Guinness Global Quality Mid Cap

September Commentary

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Global equities recovered in August following a turbulent July. A strong earnings season supported this reversal, helping to rebuild confidence in the underlying profit outlook after the prior month's steep declines in technology and semiconductor stocks. However, long-term government bond yields remain elevated, driven higher by persistent deficit concerns, debt issuance pressures and inflation, while US Treasury Secretary Scott Bessent's move to expand long-end Treasury buybacks kept the cost of government financing in focus. Despite this significant rise in bond yields, equities have broadly continued to rally. This could be because higher yields reflect higher long-run growth expectations, primarily driven by the productivity potential of AI. Ultimately, earnings are what sustain stock prices over time, and on that front the picture has continued to improve. As the chart below shows, 2027 MSCI World earnings per share expectations have been revised sharply higher since the start of the year, moving well above the historical range. In this commentary, we examine why government bond yields are at multi-decade highs across the developed world, what actions the US Treasury is undertaking to lower long-term borrowing costs, how this might create a political problem between the Treasury and the Federal Reserve, and provide an update on the Fund's portfolio.