Is The Fed Credibility Cracking? And What Earnings Season Tells Us

📊 The Art of Investing Survey – Fill in the form here, we’d love your feedback: https://forms.office.com/e/tCyxzN48Ks 📈 Download the full Portfolio Performance Slides View the portfolio breakdown: here 📧 Get in touch: [email protected] 📱 Behind the scenes: @_theartofinvesting on TikTok 🎧 Listen on: Apple, Spotify, YouTube This week on The Art of Investing, the team assess the latest Federal Reserve decision and the key takeaways from earnings season, examining what both could mean for the market outlook. The team unpack a volatile market backdrop as the AI trade begins to unwind, bond markets take centre stage, and central bank credibility comes into question. A sharp sell-off in semiconductor and AI-linked stocks has driven significant moves across global markets, particularly in Japan and emerging markets, while rising bond yields are beginning to challenge equity valuations. The episode explores whether investors truly understand their exposure, particularly within popular themes like AI and emerging markets, and how concentration risk can quietly build within diversified portfolios. Alongside this, the team break down another week of portfolio performance and a major shift in positioning, as they debate whether this market correction presents a buying opportunity or a warning sign of deeper structural change. This Week’s Highlights: 📉 Portfolio Pulls Back A difficult week sees the portfolio fall -1.7%, driven largely by weakness in AI-linked markets. 🤖 AI Trade Unwinds Semiconductors and AI stocks come under pressure, with sharp declines across global tech markets. 🇯🇵 Japan & Emerging Markets Hit Nikkei and EM equities lead losses as tech exposure and global positioning unwind. 📈 UK Markets Show Strength FTSE 100 reaches new highs, highlighting ongoing rotation into value-led markets. 🏦 Central Banks in Focus The Federal Reserve, Bank of England, and Bank of Japan all take centre stage in a pivotal week for policy. 📊 Bond Yields Rise Sharply Markets begin to question central bank credibility, pushing yields higher and tightening financial conditions. 🔄 Rotation Accelerates Capital continues to shift away from growth and into value, changing the leadership within markets. Portfolio Snapshot – Week 50: 📊 Weekly portfolio performance: -1.7% 📈 Total return since inception: +21.4% 📅 2026 year-to-date return: +8.8% Top Performers: 📈 iShares MSCI India ETF: +2.2% 📈 iShares Core FTSE 100 ETF: +1.6% 📈 Vanguard FTSE 250: +0.3% Underperformers: 📉 iShares Nikkei 225 ETF: -6.7% 📉 iShares Core MSCI EM IMI ETC: -5.3% 📉 BlackRock World Mining Trust PLC: -4.7% Portfolio Changes: A significant shift this week as the team deploy capital back into equities: -Reduce UK Gilts (0–5yr) by 7.5% -Add 2.5% to Japan -Add 2.5% to Nasdaq -Add 2.5% to FTSE 250 The move reflects a view that recent market weakness may present selective opportunities, while also maintaining diversification across regions and styles. Big Questions This Week: • Has the Federal Reserve lost credibility with markets? • Are rising bond yields a bigger threat to equities than expected? • Is the AI trade undergoing a healthy correction, or something more structural? • Can value continue to outperform growth in this new environment? • Does this sell-off present a buying opportunity, or signal further downside? What You’ll Learn: ✔️ Why bond markets are now driving equity market direction ✔️ How rising yields impact growth vs value investing ✔️ What’s really behind the recent AI and semiconductor sell-off ✔️ How professional investors navigate earnings season volatility ✔️ Why diversification matters more than ever in shifting market regimes Disclaimer: This podcast is provided for educational and informational purposes only. The content presented is not intended as personal investment advice or a recommendation to buy, sell, or hold any particular securities or investments. All discussions regarding the model portfolio are illustrative and for educational purposes. Your capital is at risk. The value of shares, ETFs and ETCs can fall as well as rise, which could mean getting back less than you originally put in.