Global equities rose strongly in the second quarter of 2026. Developed markets returned close to 14% over the period and emerging markets rose by more than 20% in some indices, supported by improving earnings, easing energy prices and hopes that the Middle East conflict might be contained. The S&P 500 and Nasdaq each had their best quarter since 2020, rising roughly 15% and nearly 30% respectively, with technology and communication services leading. April and May saw a strong rally, while June was more mixed, with signs of fatigue in some high-growth segments and a modest pickup in volatility.
The war in the Gulf remained in the headlines but its market impact changed. After the spike in oil prices in the first quarter, Brent and WTI fell sharply in April, with Brent dropping by almost 20% at one point before stabilising and recovering modestly in May. Periodic ceasefire announcements and back-channel talks involving Gulf states reduced the perceived risk of a full-scale disruption to Gulf energy flows. The broader commodity complex weakened over the quarter, with declines in oil, precious metals and some industrial commodities during June.
Regionally, the US led headline indices but with increasingly narrow leadership, Europe and Japan benefited from improving earnings and corporate governance, and select emerging markets including India and parts of Southeast Asia saw renewed inflows. US tariffs in the 15% to 30% range remained in place. Inflation continued to drift lower, helped by softer energy prices, but remained above central bank targets in many economies, and core inflation, particularly in services, stayed sticky. Central banks in advanced economies were described as cautious and data dependent, and policy rates remained restrictive.
The report described economic growth as increasingly narrow, with a small number of US sectors and companies carrying a disproportionate share of earnings growth. The euro and sterling stabilised and the Swiss franc continued to act as a safe haven. The report also discussed the outlook, including geopolitics in the Gulf, policy uncertainty, concentrated market leadership and the balance between growth and inflation.
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