Jenson Holmes, from Titan Wealth, offers this week’s round-up of global markets
SIX months into 2026, it has undoubtedly been a topsy-turvy first half of the year. After a strong start to the year, market sentiment weakened significantly towards the end of March as investors grappled with a new war in the Middle East and the associated rise in oil prices.
Investors were concerned that higher energy prices would put upward pressure on inflation, reduce the prospects for interest-rate cuts, tighten credit conditions, weaken employment and potentially result in recession.
The outcome was a market decline of almost 10% in the US and other major markets. The first hints of a ceasefire and the prospect of the eventual reopening of the Strait of Hormuz enabled investors to look beyond the crisis and refocus on longer-term structural growth drivers, such as an AI-related investment boom, expansionary fiscal policies, accommodative monetary policies and strong corporate profits growth. This prompted a strong rebound in global markets, including in tech-related sectors and stocks.
Following the ceasefire and gradual reopening of the Strait of Hormuz, oil prices have recently fallen back to levels seen before the conflict, credit conditions have become more supportive and, importantly, US employment trends have strengthened, with jobs growth moving from negative to positive territory.
There has also been a growing recognition that lower interest rates are not a necessity for positive market returns and that previously feared interest rate rises may no longer occur.
The key driver for the strong performance of equities over the past year or so has been impressive margin and earnings growth.
With global growth in a good place and expected to accelerate over the next few months, analysts are revising up their earnings forecasts for the remainder of this year and into 2027, which will provide a solid tailwind for further equity gains. Lower energy prices and easing concerns around inflation will probably enable the Federal Reserve, Bank of England and other central banks to adopt a “wait and see” approach and keep monetary policy accommodative, which would further support markets.
Technology has once again been the dominant investment theme so far this year. The continued rollout of artificial intelligence infrastructure, data centres and software applications supported strong gains in tech sectors, with semiconductors leading the way.
More recently, markets have seen a rotation out of some areas of tech, and especially the more expensive stocks, into cyclical and value sectors including small caps in the US, financials, healthcare and industrials. We have also seen capital move out of the US into Europe, Japan and emerging markets in a similar way to last year.
This is likely to continue in the second half of this year as the global economy strengthens, the dollar resumes its weakening trend and as investors look to take advantage of cheaper valuations and a broadening out of the strong earnings story.
