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H1 2026 Market Overview
MSCI World rose 13% in EUR, driven by technology and semiconductors. The market saw rapid leadership shifts – from gold and silver, through energy during the Iran conflict, to AI/semiconductors and finally the space theme around the SpaceX IPO.
Algorithm-driven Trading and Passive Flows
Record inflows into passive funds are reshaping market dynamics. A memory chip ETF reached $22 billion in AUM in ten weeks, illustrating the speed at which retail capital can move.
Upgraded Return Forecast for 2026
The total return forecast has been raised from 10–15% to 15–20%, driven by significant earnings upgrades. The second half is expected to remain volatile with pronounced sector rotations.
Geopolitics and Inflation
The Iran conflict's closure of the Strait of Hormuz pushed oil prices to $120 per barrel. With prices now back around $70 (end of Q2), inflation is expected to ease and unlock consumer spending not yet priced into markets.
Sharply Improved Earnings Forecasts
Global earnings growth for 2026 has been revised up from 14% to 22%. Memory chip makers Micron, Samsung and SK Hynix are expected to generate a combined $400 billion in net income – a historically unprecedented development.
Undervalued Sectors
Consumer cyclicals, consumer staples and healthcare have not participated in the rally and are trading at decade-low valuations, creating potential investment opportunities.
Hyperscalers and AI Investment
The six largest hyperscalers are executing the largest peacetime capital deployment in corporate history, with combined capex approaching $1 trillion per year around 2029–2030. Investors should focus on free cash flow rather than reported EBIT.
Hyperscalers – Revenue Growth
Combined revenues are expected to grow from $1.6 trillion in 2025 to over $6 trillion by 2035. AI token volumes are expected to increase 20–30 fold, but token prices are forecast to fall 90% by 2030 as competition intensifies.
Free Cash Flow – Patience Required
Hyperscaler free cash flow is set to decline sharply to $48 billion in 2026, before recovering to over $2 trillion by 2035. A rotation from semiconductor names into hyperscalers is expected around 2028.
Consumer Sentiment – A Contrarian Theme
Despite a strong economy and record savings, consumer confidence sits at crisis levels. Major consumer brands trade at decade-low valuations – a geopolitical recovery and falling interest rates could trigger a significant rebound not yet priced in by the market.
