Markets often move in unexpected ways, and June was a timely reminder that even positive geopolitical developments do not always translate into positive investor sentiment. Beneath the headlines, shifting expectations around interest rates, energy prices and global growth continued to reshape the investment landscape, while longer term themes remained firmly in focus. In this month’s update, our Chief Investment Officer, Jeff Brummette, looks beyond the short-term market moves to explore the forces influencing portfolios today, the opportunities beginning to emerge, and the risks that investors should continue to keep firmly on their radar.
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Ironically, the month in which the U.S. and Iran signed a Memorandum of Understanding (MoU), setting out a 60-day window to agree a permanent peace, also saw equity markets deliver their weakest returns since the war began on 28 February. This was not entirely surprising, as we saw several of the chipmakers that had soared through April and May pause for a breather, giving back some of their recent gains.
Semiconductors – May Performance (as of 28.05.2026)
Source: Oakglen Wealth via Bloomberg
For the quarter, U.S. and Japanese equities led the way, with AI related stocks continuing to perform particularly well. Fixed income markets were relatively calm in June, with yields moving modestly lower following the sharp rise in rates seen in March. That earlier move had been driven by fears that the surge in energy prices could force central banks to tighten policy more aggressively.
Equity Markets
Index returns are in local currency terms except where noted
Source: Bloomberg
Fixed Income Markets
Source: Bloomberg
Alternative Investments Markets
Commodity returns are versus the U.S. dollar
Source: Bloomberg
Currency Rates
Exchange rate changes are versus the U.S. dollar
Source: Bloomberg
UK and U.S. Ten-Year Government Bond Yields
Source: Bloomberg Finance L.P.
Turning to the central banks, the European Central Bank (ECB) raised rates by 25 basis points and signalled that further moves were possible, although there was little sense of urgency in its messaging. The tone of its comments suggested that overnight rates of 2% were perhaps too low.
The Bank of England (BoE) and the U.S. Federal Reserve (Fed) both left rates unchanged, while reiterating that their determination to bring inflation back down to their 2% targets was unchanged.
Newly appointed Federal Reserve Chair Kevin Warsh was not the dove many had expected, or indeed that President Trump had hoped for. However, he was able to keep a Federal Open Market Committee that had been drifting in a more hawkish direction to remain on hold.
The move lower in rates was aided by oil prices, which tumbled back towards pre-war levels on expectations that the cease-fire and the MoU would allow shipping to travel through the Strait of Hormuz without disruption.
Oil Price ($/barrel)
Source: Bloomberg Finance L.P.
Strait of Hormuz Daily Ship Crossings
Source(s): AIS and vessel movement data suppliers are IHS
We suspect the market may be ahead of itself on this. Iran continues to disrupt the free movement of ships through the Strait and traffic volumes remain well below pre-war levels.
Observed Oil flows through the Strait (mbd)
Source: J.P. Morgan
Gold, silver and bitcoin all fell over the month and the quarter, as the dollar showed resilience. This was supported by a shift in interest rate expectations, with markets shifting from the rate cuts anticipated before the war began towards the possibility of further rate hikes.
Gold, Silver and Bitcoin
Source: Bloomberg Finance L.P.
As we look forward to the second half of the year, we expect investment in AI to remain a major influence on economic growth and equity market performance.
AI Capex (Last 12 months actual and estimates)
Source(s): J.P. Morgan Equity Strategy & Quantitative Research, Bloomberg Finance L.P., FactSet
This staggering amount of capital expenditure is being driven by the voracious demand for the computing power required to train and run AI models. Companies such as Anthropic and OpenAI are seeing revenues climb almost vertically, fuelled both by a rapidly expanding user base and increasing usage from existing customers.
Anthropic and OpenAI Revenue Rate
Source: Polar Capital
It isn’t just AI. Broader business investment is also showing signs of improvement.
This chart of purchasing manager surveys suggests that capital expenditure is increasing across a range of sectors, with spending on non-technology and consumer goods investment growing as well.
Global Manufacturing PMI Indicators by Sector
Source: S&P Global, J.P. Morgan
Credit growth is also improving, which should provide further support for business investment.
Lending to Businesses
Source(s): BoE, ECB, FRB, J.P. Morgan
This is helping to support stronger earnings expectations and a more resilient labour market.
Earnings per share growth (% change)
Note: Japan refers to the period from March in the year stated to March in the following year–EPS post-goodwill
Source: IBES, MSCI, Datastream. As at COB 24th June 2026
Earnings growth is likely to continue to sustain higher equity prices. Improving business confidence is also beginning to translate into increased levels of hiring, reinforcing the broader economic recovery and providing a further tailwind to corporate earnings.
U.S. Non-Farm Payrolls Monthly Change
Source: Bloomberg Finance L.P.
The key question for markets is how the Fed and other central banks will respond to improving growth while inflation remains above target. The Fed has tolerated inflation running above target for six years and we suspect they will remain patient, particularly if the recent reversal in oil prices helps ease inflationary pressures. While the ECB has already raised rates once, it too will want to see whether lower energy prices bring inflation back towards its 2% target. In the UK, the BoE will not only watch the impact of energy price declines but also the potential changes in tax and government spending following the Labour leadership change.
Although we do not expect central banks to tighten policy in the near term, we continue to see upward pressure on longer term interest rates. AI capital expenditure is increasingly funded by debt issuance. This is colliding with still growing fiscal deficits, sharply increasing defence spending, and greater demand for capex spending in the energy and material sectors.
Against this backdrop, it is difficult to expect bond returns to exceed their running yields. Since the pandemic, bonds have also provided less protection during equity market setbacks than investors have traditionally expected, reducing their effectiveness as a portfolio diversifier during periods of market stress.
U.S. Treasuries Have Become Less Reliable Shock Absorbers During Equity Drawdowns
Data as at April 30, 2026
Source: Bloomberg, KKR Global Macro & Asset Allocation Analysis
Defence spending looks set to remain a long-term growth theme as countries replenish equipment and munitions consumed during the conflict with Iran and as Europe seeks to reduce its reliance on the U.S. for security. As a result, we continue to maintain meaningful exposure to defence companies within our portfolios.
The negotiations between the U.S. and Iran remain fragile and unpredictable. While a broader escalation has been avoided, we expect a period of uneasy stability rather than a lasting resolution. Disruption to shipping through the Strait of Hormuz is therefore likely to remain an ongoing risk, with Gulf nations continuing to develop alternative routes to export their energy, which reduces their dependency on the Strait. We increased our energy exposure during the conflict and believe this positioning should continue to benefit portfolios in an environment characterised by greater volatility in energy prices.
Furthermore, we have taken some profits from areas of the technology sector that have performed particularly strongly and are redeploying capital into select alternative investments, while further reducing exposure to longer duration fixed income.
With the situation in the Middle East still evolving and the U.S. approaching what are likely to be highly consequential midterm elections in November, we expect financial market volatility to remain elevated over the coming months.
The price and value of investments and any income that might accrue may fall as well as rise and is not guaranteed. You may not get back the amount of your original investment.
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Hear more from the Oakglen experts
Our investment team continue to provide interesting and informative content to help keep you in the loop on recent global news and market trends. See below for some key highlights from around the world which our investment team have also recently covered:
Read more:
- SpaceX’s $75bn Bet on the Future Faces a Reality Check
William Lamond, Investment Director
- June 2026 Investment Summary
Jeff Brummette, Chief Investment Officer
- Central Bank Update: March 2026 – The Energy Shock Part I
Central Bank Update: May 2026 – The Energy Shock Part II
Jeff Brummette, Chief Investment Officer
You can read other articles from the team on our News & Insights page.
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