June Outlook Report

Global Outlook | June 2026

Profits Propel the Late Cycle Onward

Welcome to our June Global Outlook Report. We examine how markets remain resilient despite geopolitical volatility; the derating of software companies, contrasted with the strong earnings of technology more broadly, and the underlying fundamentals of private credit, amid rising investor concerns.

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Market Volatility has Decoupled from Geopolitical Risk

Policy uncertainty spiked around Liberation Day in 2025 and again with the Iran conflict in 2026, yet market volatility has not remained elevated – a clear break from prior cycles.

We read this as a shift in how markets handle headline risk. The VIX moved on both occasions but declined quickly, even as policy uncertainty remained high. Markets have learned to look through the noise. The more pressing variables driving asset prices are economic fundamentals and the trajectory of AI adoption. Headline risk, it seems, is increasingly just that.

Software Concerns are Driving BDC Discounts Wider

The largest fifteen BDCs trade at a 22% discount to NAV, wide relative to the long-run historical average, which, in our view, is largely a function of software sector exposure.

Private credit has been increasingly concentrated in software and technology companies. As concerns around software fundamentals have grown, BDC valuations appear to be reflecting that more acutely than the broader high-yield market. Our model suggests a fair discount of approximately 7%, and we would expect discounts to normalise somewhat toward that level over the coming quarters, as the severity of software-related impairments becomes clearer.

Implied Software Growth Expectations have Fallen Significantly

Inverting a discounted earnings model shows that implied medium-term earnings growth for software has compressed from high single digits in 2025 towards low single digits today.

Implied earnings growth expectations have fallen sharply as AI's impact on software business models remains difficult to quantify. In our view, while the direction of the revision is justified, the magnitude may be too punitive. A normalised growth rate in line with or below nominal GDP for an industry that retains secular tailwinds would represent a significant structural break.

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