Market Moves video: Earnings, AI and interest rates – what’s next for markets?

Strong earnings and growing confidence in AI monetisation have helped support markets, but questions remain over inflation, interest rates and geopolitical risks. In the latest Market Moves, Patrick Farrell shares his outlook for investors and the factors likely to drive markets in the months ahead.

Key takeaways:

• Strong earnings remain the main market driver
• AI is moving from hype to monetisation
• Investors should watch interest rates closely
• Geopolitics and energy prices remain risks
• The UK Budget is unlikely to be the main market catalyst
• Investors should remain diversified 

In case you missed it, you can watch last month’s video with Patrick Farrell here: Growth, geopolitics, and market resilience.

Market Moves August 2026 transcript

KG: Hello, and welcome to the most recent edition of Market Moves with me Katrina Gane. It's been another busy month for markets and I'm pleased therefore that we have Patrick Farrell, our Chief Investment Officer at Raymond James, to unpack some of what's been happening over the summer, but also to discuss what we need to look out for going ahead – with the Budget, policy changes and the year end. So, Patrick... What have been some of the key factors driving markets recently, and also – what do you think we need to keep looking at that will be relevant as we move into September?

PF: Well, I think markets have definitely been buoyed by the blowout earnings coming through for the end of June quarter. I think that's going to continue to sort of drive some of the momentum. I think one of the sort of key things that we need to look at now is that tech companies have been able to monetize some of the huge investments that they've made around AI. But at the same time, I think the question that's going to go going forward is very much around the durability of those earnings and how they can continue to sort of ramp up some of the revenue generation and justify. the huge amount of capex that they've put into the marketplace.

KG: And do you think it's concerning then that investors have those that have a heavy concentration in AI and tech and sort of are there risks that you foresee in the coming months be it sort of geopolitical or other that need to be considered?

PF: Yeah, I do get asked this question a lot and I think when we start to consider what a bubble looks like around the technology. I think we've also got to realise that this is a different environment. The hash is being generated. And now that we're sort of getting a lot more comforted about how they're monetising some of the AI investments, I think that it becomes a lot clearer in terms of this is not a bubble -like tendency. There are little situations of bubble-like tendency starting to grow, but the main companies are in a very, very strong position off the back of this.

KG: Great. So, looking back, there's obviously been an incredibly strong earnings season. But looking forward, there's going to be a lot of policy changes coming up, including the Budget in the UK. So, what do you think the investors should be keeping an eye on? Or what do you see as being most poignant going forward into the Autumn?

PF: I think from an investment perspective, and only from an investment perspective, the Budget will be difficult to actually move markets to generally. So, I'm not necessarily concerned about that. More so because I think Andy Burnham's hands will be tied, even though he might not want them to be. it will be difficult to sort of get too many major initiatives through in relation to the Budget. I think some of the sort of key drivers will be around the interest rate expectations and what central banks need to do. And I think, you know, we've had earnings being the key driver so far in terms of what's happening in markets. We can't ignore the Middle East and the oil shock in relation to what's happening around the Strait of Hamuz. And then sort of looking forward, what does that mean for inflation outcomes and how a central bank is going to respond?

KG: Yeah, because I guess arguably there's going to be a lot of inflationary pressures coming through. Gas reserves are low. We're seeing fuel costs go up, food inflation as well. So that will dictate what happens potentially in the coming months. And therefore, do you think there'll be much discrepancy between the US and the UK with rate cuts or not?

PF: Well, I think that the US is in a lot stronger growth position. And therefore, you know, our expectations are for at least one rate hike coming through in the US just to keep things under control. In the UK, even though we were actually expecting a couple of rate hikes from a market perspective, the view that we have at Raymond James is that we're probably not going to get any because we are already seeing some disinflation activity coming through from economic sensitive areas in the UK, which suggests to me that things are already under pressure. The Bank of England know that, and I think that they'll be very data dependent, but at the same time, they're not going to want to upset the fragile balance that we have in there.

KG: So, turning it back to investors, what's one piece of information or tip that you'd give them going ahead for the next few months to sort of lock in on?

PF: For our underlying investors, I think it's going to be important just to remain a little bit cautious, but also there are going to be plenty of opportunities out there and that the market itself, it will be a long-term play. But at the same time, making sure that you've got some stabilising influences in your portfolio, I think, is a really good situation to be in.

KG: Great. Thank you so much, Pat, for joining us.

PF: Thanks very much, Katrina.