Weekly Investment Update (07/24/2026)

Geopolitical and trade risks have returned to the foreground. Renewed U.S.-Iran military activity and threats to key shipping routes have increased the risk of another energy shock, while the latest round of tariffs adds uncertainty around input costs, supply chains, and corporate margins. Even so, history suggests that markets can remain resilient when geopolitical disruptions are contained and companies have time to adapt to changing trade rules. The effects will not be uniform, but firms with strong balance sheets, pricing power, and flexible supply chains should be well-positioned to navigate the volatility.

At the same time, the rapid improvement in Chinese open-weight artificial intelligence (AI) models is changing how investors should think about the global AI opportunity. Lower-cost, increasingly capable models should expand adoption and may increase overall demand for computing power, much as greater efficiency has done in earlier technology cycles. However, the economic benefits may not accrue exclusively to current U.S. leaders. Chinese models supported by domestic chips and lower-cost energy could challenge the pricing power of closed-model developers and redirect some infrastructure demand away from the U.S. ecosystem. In our view, the AI theme remains important, but the opportunity is becoming more nuanced. We continue to favor selectivity, focusing on areas where durable value creation is more likely, while recognizing that competition, pricing pressure, regulation, export controls, and uncertainty around returns on AI-related capital spending remain material risks. 

New Tariff Structure, Little Economic Impact

What is happening: The Trump administration announced several trade policy measures this week ahead of the July 24 expiration of Section 122 tariffs (10% universal rate). Section 122 was the immediate replacement for the International Emergency Economic Powers Act (IEEPA) tariffs, which were struck down by the Supreme Court in February. Before expiration, the administration announced the results of its Section 301 forced labor investigation, imposing 10% to 12.5% tariffs on imports from 60 trading partners. Since the tariff rate has already been 10% under Section 122 in recent months, moving the range slightly higher should have a limited impact.

The U.S. also announced a 50% tariff on certain imports from Canada under Section 338 of the Tariff Act of 1930. The tariffs are scheduled to take effect on August 19, allowing 30 days for negotiations. Section 338 allows the president to impose duties on countries deemed to have discriminated against U.S. commerce. In this case, the Trump administration released separate proclamations on Canada’s alleged discrimination against U.S. motor vehicles, alcohol, and dairy products. Despite the elevated headline rate, the tariffs would apply to a relatively narrow range of products, excluding energy, potash, critical minerals, and goods already subject to Section 232 (national security) tariffs. Even if fully implemented, they would cover roughly $20 billion of U.S. imports from last year, or only about 0.6% of total U.S. goods imports. 

Why it matters: There are several factors influencing the latest trade policy announcements, and while headlines continue to evolve, we expect the overall economic impact to be limited. Section 301 tariffs were largely expected given the administration launched its forced labor investigation last March, and the latest announcements represent a continuation of the status quo under a different legal framework. While the United States-Mexico-Canada Agreement (USMCA) negotiations are underway, discussions so far have only involved the U.S. and Mexico. We believe the elevated headline rate, though affecting only a narrow range of products, is an attempt to bring Canada to the negotiating table.

Despite the headline developments, little has fundamentally changed, and we expect little impact on U.S. growth or inflation. Trade policy uncertainty remains well below 2025 peaks, when tariff rates were frequently changing, leaving companies with much less visibility into future costs. The latest announcements generally preserve the existing tariff structure, reducing the risk of a renewed tariff-driven shock to business confidence. Similarly, broad-based declines in goods prices in the June CPI report suggest that much of the tariff passthrough has already occurred. While the new tariff range is slightly higher, our base case is that the changes will not drive a broad reacceleration in consumer goods prices, assuming no material retaliation or further expansion in product scope. 

Britain’s New Prime Minister Seeks to Balance Cost-of-Living Relief with Fiscal Prudence

What is happening: On Monday, Andy Burnham became Britain's seventh prime minister since the 2016 Brexit referendum, succeeding Keir Starmer. Burnham, the former mayor of Greater Manchester, was formally appointed by King Charles and pledged to build a "new national sense of unity, of common purpose and positivity." He said his government would focus on working families, ease the cost of living, shift power from London to regional governments, expand social housing, and improve long-term care. Labour lawmakers hope Burnham’s down-to-earth style will help slow the rise of Nigel Farage’s populist party, Reform UK.

The new prime minister moved swiftly to assemble a cabinet that marked a clear break from the Starmer era. The headline surprise was the appointment of John Healey, the former defense secretary who had resigned from Starmer's government in a dispute over defense spending, as Chancellor of the Exchequer. Burnham’s early moves included announcing an £850 million plan to scrap the 5% sales tax on domestic energy bills from October, his first major step to address the cost-of-living squeeze. Burnham has promised that his full agenda will be set out in the fall. 

Why it matters: The appointment of a new prime minister and chancellor, Britain’s finance minister, comes at a delicate moment for U.K. markets. Yields on 10-year British government bonds are near 5.1%, higher than comparable rates in the U.S. (4.7%), Italy (4%), and Germany (3.2%). The gap reflects higher relative inflation risks due to a greater reliance on imports, heavier fiscal issuance, and Treasuries’ benefiting from superior liquidity and reserve-currency demand.

Investors are therefore closely watching Burnham’s pledge to use “any flexibility within” the government’s existing fiscal rules. Those rules require the government to cover routine spending with tax revenue and put a broad measure of public debt on a downward path, relative to the size of the economy. Healey’s appointment provided some early reassurance with U.K. bond yields only marginally higher on the week as investors eased concerns about fiscal and political risk. Healey is viewed as a centrist with Treasury experience and a steady hand. JPMorgan Chase CEO Jamie Dimon, meanwhile, warned Burnham against raising taxes on banks, saying such a move could jeopardize the firm’s planned £3 billion London office and discourage investment in the U.K. In certain discretionary global equity strategies, we remain underweight U.K. equities relative to the applicable benchmark, with exposure generally focused on large, globally diversified U.K.-listed companies.