Stocks hit all-time highs

A-Level results day is fast approaching, but investors are celebrating a different set of figures. Some of the world's biggest companies have published financial results in recent days - and markets have been pleasantly surprised.

UK, US and European stocks are all trading near record highs and, importantly, the gap between the three regions is narrowing. For years, the US has been top of the class, but the S&P 500, FTSE 100 and Euro Stoxx 600 have delivered very similar returns over the past year.

This is because several different forces are driving stocks higher. On the one hand, artificial intelligence is booming. Investors were twitchy before Big Tech’s results season, but huge profit figures have steadied their nerves. As of late July, US tech earnings were up by 69% year-on-year.

• Looking for personalised financial advice? Our advisory service can help you plan for your next step

But it’s not just AI that’s doing well. Last week, BP reported its strongest profits since 2022, fuelled by higher oil and gas prices. The same story is playing out across the energy sector, boosting UK and European markets, which have plenty of exposure to ‘old economy’ industries. The banking sector has also benefited from the oil price surge, as it has pushed up interest rate expectations.

We are now at the tail end of earnings season, so surprises should be few and far between. There are a couple of big hitters still to come, however. Nvidia reports on 26 August, while Walmart - a good gauge of how US consumers are feeling - will report on 20 August.

For now, the mood is upbeat. After a three-year selling streak, even Berkshire Hathaway is buying equities again under the leadership of new chief executive Greg Abel. The optimism is a little unnerving, however. It seems strange that current conditions - which threaten to reignite inflation - can be good for mature energy and banking giants, as well as AI firms laser-focused on growth.

• Get the latest market updates, ISA news and pension insights by email

Interesting times

There are a couple of key economic updates to look out for this week. On Wednesday, the US will publish inflation figures for July. Inflation in June was lower than expected at 3.5%, and analysts are expecting it to fall again to 3.4%. The data could have important implications for US interest rates - and, by extension, markets around the world. A higher-than-expected reading could result in rates staying higher for longer.

Closer to home, the UK will report GDP figures for the second quarter on Thursday. Investors were pleasantly surprised by the first-quarter figures, which showed the UK economy expanded by 0.6%. More growth would be welcome news, but there could be a sting in the tail for borrowers and investors hoping for lower rates.

All that glitters

One of the stranger developments of recent days has been the pick-up in precious metals. After two months of outflows, gold ETFs attracted inflows in July, and the price of gold increased by 7% last week. Gold miners such as Fresnillo and Hochschild are climbing too.

It is tricky to pin down exactly what is driving the bounce, which follows a tough few months for gold. The metal did not behave like a traditional safe haven during the early stages of the Middle East conflict, but the changing outlook for interest rates could be moving the dial. If the last year is anything to go by, however, investors should be prepared for a bumpy ride.

Got a burning question you want to ask? Why not drop us a line. Click here to ask your question.

• Read: Is this the ultimate in selfless gifting to your child?
• Read: Top 10 best-selling ISA and SIPP funds in July
• Read: The hidden risk behind the next market correction

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.