Run to the Hills

July 17, 2026

Elias Haddad

Tech-led equity market plunge triggers flight to safety. CHF outperforms and global bond yields dip.

Japan prime minister backs more investment at home. JPY staged a brief rally before surrendering all its gains.

Light economic calendar ahead. US July sentiment survey the highlight.

Crude oil prices are directionless just below this week’s high. The longer the disruption to Strait of Hormuz traffic, the greater the upside risk to energy prices and inflation. The IMF warned that crude oil inventories are now getting closer to multiyear lows and could reach stress levels should supply disruptions persist or hoarding gather steam.

Global equity markets are weighed down by the semiconductor selloff. Taiwan’s Taiex index led the decline, falling more than -6% today, while Nasdaq 100 futures are down over -2%. Investors are increasingly questioning the sustainability of the ongoing AI capital expenditure boom. The BIS annual economic report cautions that boom-bust cycles are a regular feature of past investment surges driven by transformative technologies.

USD recovered some of this week’s losses as the tech-led equity market plunge triggered a modest flight to safety. CHF is outperforming all major currencies. We expect USD to edge a bit higher in the next couple of months underpinned by: (i) US economic outperformance, (ii) the Fed's resolve to get inflation back to 2% anchoring hawkish rate pricing, and (iii) strong foreign demand for US long term securities.

US consumer spending activity remains resilient. In line with consensus, US retail sales rose 0.2% m/m vs. 1.0% in May and the more policy relevant control-group sales - which exclude cars, gas, food services, and building materials – increased 0.5% m/m vs. 0.8% in May. Retail sales in real term is particularly solid given that headline CPI fell -0.4% m/m in June.

Today, US June housing starts, import and export prices, and industrial production data will feed into the Atlanta Fed GDPNow model update. As of yesterday, the model estimates annualized US real GDP growth of 1.7% q/q in Q2, up from 1.4% but down from the 4.3% peak in mid-May and below its 3.0% average since late April.

July University of Michigan sentiment survey is also due today (3:00pm London, 10:00am New York). Long-term inflation expectations are critical to watch for confirmation that long-term inflation expectations remain anchored.

JAPAN

USD/JPY had a modest kneejerk downside move after comments by Japan Prime Minister Sanae Takaichi. Takaichi echoed recent comments by Finance Minister Satsuki Katayama flagging the importance “to pursue measures that encourage households and pension funds, including the Government Pension Investment Fund, to further increase their investment in Japanese financial assets.”

Japan is one of the world’s largest net creditors with net foreign assets totaling roughly $3.6 trillion in Q1 or 83% of GDP. As such, even a modest portfolio repatriation could generate meaningful JPY and JGB demand.

Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries.This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners.© Brown Brothers Harriman & Co. 2024. All rights reserved.