A Fed chair transition, a war and a fragile peace with Iran, a memory-chip shortage that reset the AI trade, and the largest IPO in history. Here's what actually moved markets in the first half of the year — and where we're positioned for the second.
Eight forces defined the first half — and nearly all of them are still live going into H2.
Kevin Warsh was confirmed as the 17th Chair of the Federal Reserve on May 13 in a 54–45 vote — the narrowest confirmation margin in the Fed's history — and was sworn in on May 22, running his first FOMC meeting on June 16–17. Trump nominated Warsh on the expectation he would push rates sharply lower. Instead, Warsh inherited an economy where inflation was reaccelerating, complicated by an oil shock from the Iran war. At his hearing he committed to running an independent, "reform-oriented" Fed. Jerome Powell has remained on the Board of Governors through the transition, an unusual arrangement intended to preserve institutional continuity.
The market's base case shifted through H1 from "cuts resume" to "steady for the rest of 2026" — and by June, growing odds were being priced for the next move to be a hike, not a cut, with September flagged as the earliest live meeting for that debate.
The US and Israel struck Iran on February 28, opening a war that ran through the spring and briefly closed off parts of the Strait of Hormuz. A first ceasefire held from April 8 but was tested repeatedly. On June 17–19, President Trump and Iranian President Pezeshkian signed the "Islamabad Memorandum" — a 60-day framework to end hostilities on all fronts (including Lebanon), reopen the Strait of Hormuz to shipping, and open talks on sanctions relief, frozen assets, and Iran's nuclear program.
Oil tells the story better than any headline: our Brent and WTI trackers were up +84% in Q1 alone as the war escalated, before giving back roughly a fifth of that gain in Q2 as the peace framework took hold — still finishing H1 up +44% and +54% respectively. The 60-day negotiating window runs squarely into Q3, making this the single largest swing factor for H2 volatility.
The Bank of Japan kept hiking — moving its policy rate to 1% by June and signalling further quarterly increases toward a 2% neutral rate, the most aggressive tightening path of any G10 central bank. The ECB held its deposit rate at 2%, notably more dovish than both the Fed and the BoJ. In the US, headline inflation reaccelerated through H1 as tariffs and the oil shock filtered into consumer prices, forcing the new Fed under Warsh to openly debate whether the next move is a cut or a hike.
10-year Treasury yields drifted higher through the second quarter as markets repriced from "cuts resume" to "steady-to-hike," with a parallel back-up in Japanese government bond yields as the BoJ tightened into a weakening yen.
Hyperscaler AI capital spending kept compounding through H1, running at an annualized pace well above last year's already-record levels. But the trade rotated beneath the surface: the pure GPU/logic names that led 2025 were no longer the best-performing part of the AI stack. Our semiconductor benchmark (SMH) finished H1 up +82% — and nearly all of that gain came in Q2, powered by memory, not logic.
DRAM and NAND capacity has been redirected en masse toward high-bandwidth memory for AI servers, leaving consumer and enterprise memory in acute shortage. In June, Apple raised iPad and Mac prices for the first time in years, with Tim Cook calling the component cost spike a "hundred-year flood." Microsoft raised Xbox prices by $100–150, discontinued its top storage configuration, and warned that console memory and storage costs — already up more than 2.5x — could double again by fall 2027. DRAM spot prices rose as much as 80–90% quarter-over-quarter in Q2, and both Micron and SK Hynix effectively sold out capacity through 2026, with some contracts running to 2030.
The memory makers were the direct beneficiaries: Micron (MU) was our single best-performing pick, up +304% in H1 — nearly all of it in Q2 — with SK Hynix and Samsung posting comparable rallies in their home markets. Micron's own guidance, and independent forecasts from Gartner, S&P Global and IDC, converge on the shortage persisting through 2027, and possibly into 2028.
SpaceX priced its IPO in June at roughly $135 a share, valuing the company at approximately $1.75–2.1 trillion — the largest listing ever — and immediately entered the upper ranks of global market capitalization, pushing Tesla and Meta out of the traditional top ten. Anthropic filed a confidential S-1 on June 1 following a $65bn raise at a ~$965bn valuation; OpenAI followed a week later on June 8, in a range reported between roughly $850bn and $1 trillion. Listings for both are expected later in H2 2026 or into 2027.
Together, the three offerings represent one of the largest capital events markets have seen, and are actively reshaping index composition — pulling both attention and flows away from the incumbent Magnificent Seven.
Persistent tariff-driven inflation forced a political pivot from "tariffs as revenue" toward "tariffs as an affordability problem." The administration has floated $2,000 "tariff dividend" checks funded by tariff revenue, timed for mid-2026 — ahead of the midterms — though the mechanism remains unresolved pending congressional action and a Supreme Court case on tariff authority. Meanwhile, "One Big Beautiful Bill" tax provisions continue to support consumer spending and underpin base-case GDP growth forecasts of roughly 2.2% for the year.
South Korea's KOSPI was the standout global story: memory-driven earnings upgrades at Samsung and SK Hynix pushed our Korea benchmark (EWY) up +108% in H1 alone, even as the index continues to trade below its historical average valuation. Taiwan continues to capture an outsized share of AI capex spillover as the world's chip-manufacturing hub. Chile's copper-linked IPSA had a genuinely volatile H1 — starting the year near an all-time high on 2025's 57% rally and a new pro-market president, giving back most of that gain during the oil shock and a weak Q1 GDP print, then recovering through June as copper pushed to fresh highs. It's a clean example of how commodity-linked emerging markets can swing hard around a war. Broadly, emerging markets (EEM, +25% in H1) comfortably outpaced the S&P 500, extending a trend that began in 2025.
Positioned early into memory, AI infrastructure and space — and it showed. Here's the scorecard.
Equal-weighted average return, by month. April and May did the heavy lifting; June was a genuine pause as the market digested Warsh's first hawkish signals and reassessed AI/memory valuations.
| Ticker | Theme | H1 Return |
|---|---|---|
| NASDAQ: MU | AI Memory | +304.4% |
| NASDAQ: NBIS | AI Data Centre | +229.9% |
| NASDAQ: LITE | Optical Infrastructure | +132.8% |
| NYSE: CAT | Industrial | AI Power | +85.9% |
| NYSE: PL | Geospatial Intelligence | +68.0% |
| NASDAQ: IREN | AI Energy | +21.1% |
| NASDAQ: GOOGL | Mag 7 | AI | +14.2% |
| NYSEAMERICAN: UUUU | Critical Minerals | −0.3% |
| NYSE: NVO | Healthcare | −5.8% |
| NASDAQ: META | Mag 7 | AI | −14.7% |
| NASDAQ: ONDS | Drones & Defence | −15.6% |
| NASDAQ: MELI | LATAM Infrastructure | −15.7% |
| NYSE: NU | LATAM Fintech | −20.2% |
| NASDAQ: OPEN | Real Estate Recovery | −20.8% |
| NASDAQ: PATH | AI Adoption | −33.7% |
| Equal-Weighted Average | +48.6% | |
Six calls for the second half — three underweights, three overweights.
H1 already showed the crack: our tracked Mag 7 names averaged +2.5% against a market that returned far more elsewhere. Add three new headwinds into H2 — SpaceX's IPO absorbing liquidity and index weight that used to flow to mega-cap tech, OpenAI and Anthropic filings drawing the "pure AI exposure" trade away from proxy holdings like Microsoft and Alphabet, and a Fed under Warsh that is now debating hikes rather than cuts. We're not calling for a collapse — these remain the most profitable companies on earth — but the multiple expansion phase of this cycle looks behind us.
Software has been technically oversold for months, but oversold isn't the same as attractive. The sector still faces real headwinds into H2: elevated rates raise the discount rate on long-duration growth cash flows, and enterprise budgets are visibly shifting toward AI infrastructure capex rather than SaaS seat licenses. July earnings season is the key tell — we're watching forward guidance closely before adding back exposure.
As the AI trade matures, the market is rotating away from pure logic/GPU names and toward the second- and third-order layers of the stack. H1 already showed this: SMH's +82% return was overwhelmingly a Q2, memory-driven move. We'd rather own the bottleneck than the chip everyone already owns.
This is the flip side of the semis call, not a contradiction of the AI thesis. Micron's own guidance — and independent estimates from Gartner, S&P Global and IDC — converge on the memory bottleneck lasting through 2027, and possibly 2028. We want names like MU, plus the optical/photonics (LITE) and power/energy names (IREN, CAT) that sit downstream of the same capex wave, rather than the GPU makers whose easiest gains are already priced in.
H1 was broadly risk-on. We expect H2 — especially September through November — to carry materially more volatility as midterm positioning builds, the Iran deal's 60-day window forces a real decision, and rate-hike expectations keep climbing toward a possible December move. As that repricing happens, we expect a rotation into consumer defensives — utilities, healthcare, housing — funded by trims to tech, growth and semis exposure.
Bitcoin was the worst-performing major asset we track in H1, down roughly 34% and closing June on its worst month since 2022, hit by SpaceX-IPO-driven rotation and the heaviest spot-ETF outflows since the products launched. That underperformance, against a backdrop of continued whale accumulation, is exactly the setup we want to accumulate into. We're not calling a bottom on any single day, but we'd rather build a position on weakness than chase a breakout after the fact — and we do expect one in H2.
Precious metals diverged hard in H1 — and we think that divergence continues.
Gold gave back 7% in H1 after 2025's historic run, but the structural bid — central bank buying, "shadow" reserve demand, and fiscal-dominance hedging — is intact, not broken; this reads as digestion, not a trend change. Copper remains the tightest market in the base-metals complex: record prices, record-low treatment charges, and a structural deficit that AI power demand and grid build-out only widen. Chile's H1 round-trip — down double digits, then back to fresh highs by late June — is itself evidence of how firmly copper is anchoring commodity-linked risk appetite right now.
Silver was 2025's best-performing major commodity, and it corrected hard in H1 2026 — down 17% — as some of that industrial-and-investment-demand story got ahead of itself. Silver's dual identity as both a monetary and an industrial metal makes it the most volatile of the group, and we think that volatility cuts further before it cuts higher. We'd rather size this tactically than chase it back.
The 60-day Iran negotiating window (running to roughly mid-August) and any breakdown risk reopening the oil-shock trade · the September FOMC meeting, the first real test of whether Warsh's Fed hikes · July big-tech earnings, the first hard read on AI capex ROI and software guidance · the Supreme Court's pending ruling on tariff authority · confirmed listing dates for OpenAI and Anthropic · and September–November volatility as midterm positioning builds.
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