Artemis Strategic Assets Fund
Q2 2026 update

Global equities began to rebound at the start of the quarter before the signing of the US-Iran memorandum of understanding on 17 June. Japanese and emerging market indices led the charge, while the S&P 500 also rallied. Brent crude oil prices dropped 38.4% and inflation fears subsided, supporting credit markets. Technology stocks initially rebounded but came under pressure in June over the magnitude of financing needed to sustain the required infrastructure investment by 'hyperscaler' AI firms.

Performance

Artemis Strategic Assets contains two ‘buckets’: a Directional (Trends) Strategy, which aims to take advantage of market trends; and a Non-Directional Strategy, whose goal is to generate returns that are uncorrelated to market movements by taking long and short positions whose exposures offset one another. In both strategies, the fund invests in financial derivatives that give it exposure to a diversified range of asset classes, including equities, bonds and currencies.

The fund made a modest positive return of 0.9% over the quarter, led by its non-directional positions in currencies and government bonds. The Directional (Trends) Strategy was little changed, having peaked in May, before coming under pressure from the unwinding of currency pairs geared to higher oil prices. Returns in the IA Flexible Investment sector were driven by the rebound in equity markets, but this fund is designed to avoid being overly correlated with stocks.

Past performance is not a guide to the future. Source: Lipper Limited to 30 June 2026 for class I Acc GBP. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. This class may have charges or a hedging approach different from those in the IA sector benchmark.

Activity

Directional (Trends) Strategy

• Equities: We increased our aggregate equity exposure from 8.0% to 18.0% as the worst of the fallout from the Iran war was over by the end of March. Energy prices fell back during June, so we reduced our exposure to the sector. The fund ended the period with a growing position in US utilities as investors rotated out of energy and technology stocks.
• Rates (government bonds): We started the period with duration exposure around 2.1 years short, adding positions on inflation fears while the oil price continued rising. By the end of the quarter, a tentative resolution to the Iran-US conflict led us to pare these duration shorts back to just 0.7 years. Our largest shorts were in Australian bonds – where the central bank was seen as behind the curve in hiking interest rates relative to inflation – and Japanese ones, where a reluctance from policymakers to raise rates drove down prices from a high starting position.
• Currencies: We have generally been short the dollar against the Chinese yuan and Mexican peso. The former trade has worked well as the authorities in Beijing embarked on a managed appreciation of their currency, although this has recently been pared back. The short in the euro versus the Norwegian krone is a play on the weak recovery in the eurozone contrasted against the oil-based economy of Norway. We partially reversed this in June after oil prices fell back.

Non-Directional Strategy

• Currencies: Our relative preference for being long the Japanese yen was driven by macro-economic strength, underweight positioning and optimistic sentiment. Similarly, our long in the Australian dollar was a function of a relatively strong economy shielded by government support during the Iran-US conflict. Conversely, we were short the Swedish krona, due to a combination of unattractive carry, outflows and a weak economy.
• Rates (government bonds): The fund retained a relative preference for shorts in Australian bonds where forward growth expectations were relatively strong, inflation high and carry relatively weak. Conversely, we held a relative long in Swiss bonds throughout the quarter, as inflation and growth were comparatively low and carry unattractive.
• Equities: Forward earnings and cheap valuations supported our relative preference for US and emerging market equities. Meanwhile, weak forward earnings and expensive valuations explained our relative shorts in Swiss and Swedish ones.

Outlook

Geopolitics and energy: De-escalation leaves a volatile risk premium

The US and Iran signed a memorandum of understanding on 17 June, including arrangements to reopen the Strait of Hormuz to commercial shipping. As more tankers exited the Strait, Brent and WTI crude fell back towards pre-war levels by late June, easing inflation fears and supporting risk assets. Early July has nevertheless reminded markets that the risk premium has not disappeared. Renewed incidents around shipping in the Strait pushed oil prices higher again. Energy is therefore a less severe but still volatile macro risk, with potential pass-through to inflation, margins and confidence.

US monetary policy: Higher-for-longer after a hawkish pause

Although the Federal Reserve left rates unchanged on 17 June, the guidance was hawkish. It flagged solid activity and elevated inflation, demonstrating that the US economy has emerged relatively unscathed economically speaking from the Iranian conflict. New chair Kevin Warsh laid out his plans to discontinue forward guidance and cited the persistent upside overshoot of inflation compared with the 2% target. Subsequent data have moderated rather than broken the growth backdrop. June payrolls increased by only 57,000 and leisure and hospitality employment fell, but unemployment edged down to 4.2% and wage growth remained positive. This reduces pressure for an immediate hike but does not yet support easing while energy pass-through and inflation expectations remain central.

Europe: June hike delivered, data dependence thereafter

The European Central Bank (ECB) delivered the anticipated tightening of 25 basis points in June, with the refinancing rate now standing at 2.4%. The decision reflected inflation pressure from the Middle East conflict, while updated projections for 2026 and 2027 showed higher inflation and slower growth. This is not necessarily the start of a sustained hiking cycle. The ECB stressed its decisions will be data-dependent, while the late-June retracement in oil prices provided some relief. However, early-July shipping incidents keep inflation risks alive and gas prices are still around 40% higher than before the conflict. With domestic demand weak and confidence fragile, policy is likely to remain restrictive, but further tightening would require evidence of second-round effects rather than energy volatility alone. 

United Kingdom: Resilience meets a more divided MPC

UK data in June were better than feared but still mixed. May CPI was unchanged at 2.8%, while services inflation rose and vehicle fuel inflation remained high. The Bank of England held interest rates at 3.75% on 18 June, but the seven-to-two vote – with two members favouring a hike to 4.0% – showed a divided Monetary Policy Committee. The Bank noted that while energy prices had fallen from their peak, they remained volatile and were still above pre-conflict levels. This leaves the UK in a modest-growth, sticky-inflation mix. Housing has shown some resilience, with prices rising in June after several weaker months, but mortgage costs and tight financial conditions are constraining rate-sensitive sectors. The bar for near-term easing remains high. 

China and emerging markets: Stabilisation without a strong acceleration

Data from China pointed to stabilisation rather than acceleration. The official manufacturing PMI rose to 50.3 from 50.0 and the non-manufacturing PMI edged up to 50.2, helped by high-tech exports and some improvement in new orders. Domestic demand remains cautious, labour-market conditions are soft and real estate continues to drag, leaving the recovery dependent on targeted support. While lower energy prices provide relief for those emerging economies that are importers, exporters have lost part of the earlier commodity tailwind. Across the asset class, capital flows remain sensitive to the Fed's higher-for-longer stance, US dollar moves and renewed geopolitical volatility. Economies with credible policy frameworks and stronger external balances remain better positioned.