Polar Capital Global Healthcare Trust plc

Global equity markets traded sideways in July, but the apparent lack of direction of the price action masks what was a sharp rotation in the month: the AI trade began to wobble, market leadership that had been so far very narrow broadened out and momentum stocks lost steam. Renewed doubts about whether the enormous AI capital spending will pay off, rising yields and continued geopolitical uncertainty all contributed to this change in investors' positioning.

Healthcare has been a notable beneficiary of the shift, ranking among the strongest sectors in July. Within healthcare, Distributors, Life Sciences Tools & Services and Healthcare Equipment were the strongest performing subsectors, while Managed Healthcare, Healthcare Supplies and Pharmaceuticals were the main laggards.

A sharp re-escalation of the war in the Middle East and its knock-on effects for inflation and interest rates were once again the focus of investors in July. Early in the month the June ceasefire unravelled, with President Trump declaring it "over" and US forces carrying out consecutive rounds of strikes. With the conflict spilling beyond Iran's borders and into the Red Sea, the oil price surged and Brent crude briefly crossed $100 for the first time since May, reigniting inflation fears. Even though a new ceasefire took place towards the end of the month, sending oil prices down, the commodity remains almost 40% more expensive than it was at the start of the year.

The move in oil complicates what had briefly looked like an improving inflation story. The June Consumer Price Index (CPI) annual rate came in at 3.5%, against expectations of 3.8%, evidence perhaps that the spring energy spike was fading. Yet the July oil rally and fresh tariffs of 10-12.5% on 60 countries announced by Trump on 24 July threaten to undo that progress before it reaches core prices. The Federal Reserve (Fed) therefore faces a classic supply/shock dilemma: tighten into an energy-driven price rise and risk choking demand or look through it and risk second-round effects in wages and services. So far, given the continued rise in US yields despite the Fed holding interest rates unchanged, the market is predicting that the former scenario is more likely. Unless Fed Chair Kevin Warsh's resolve to make inflation "a thing of the past" starts to falter, a hike in September is becoming more and more likely.

The Company's net asset value (NAV) declined by 1.7% in July, behind its benchmark, the MSCI All Country World Daily Net Total Return Health Care Index, which returned 0.2% for the month (both figures in sterling terms). Positive contributors relative to the benchmark in July included IQVIA Holdings, Thermo Fisher Scientific and Intuitive Surgical. IQVIA Holdings' positive performance came on the back of a strong set of second quarter (Q2) 2026 financial results, with the highlights being strong new orders relative to revenue billed, solid margins and comfort that AI is emerging as a tailwind as opposed to a headwind. After a long period of anaemic revenue growth, Thermo Fisher Scientific delivered an upbeat set of Q2 financial results coupled with constructive commentary for the rest of the year. Intuitive Surgical delivered a decent set of Q2 results but offered some cautionary statements around US procedure volumes in the second half of the year that pressured the stock. Negative relative contributors in the period under review included Ionis Pharmaceuticals, Argenx and Cytokinetics. Ionis Pharmaceuticals suffered a material setback during July, announcing that a key pipeline asset, eplontersen, designed to treat cardiomyopathy, failed to hit its primary endpoint in its pivotal Phase III study. There was no thesis-changing news for either Argenx or Cytokinetics, both of which appeared to struggle alongside an indifferent biotechnology sector. We initiated new positions in Abbott Laboratories and IQVIA Holdings during July. Abbott Laboratories reported a solid set of Q2 results but, more importantly, could see accelerating revenue growth driven by new product launches. Contract Research Organisation IQVIA Holdings is starting to benefit from the strong biotechnology funding environment which we believe should benefit near-term bookings and a positive impact on near and medium-term revenue. Importantly, the company's AI offerings are gaining further traction with increasing customer adoption. The positions were funded, in part, by exits from Thermo Fisher Scientific and Centene.