Q2 2026 Market Review and Outlook
Global equity markets recovered strongly during the second quarter, reversing the weakness seen during the March sell-off. The recovery was driven by a combination of lower energy risk, resilient economic data, improving earnings expectations and a significant improvement in investor sentiment.
The MSCI World Index rose 13.5% over the quarter, bringing year-to-date performance to 8.7%. US equities recovered sharply, with the S&P 500 up 14.9% over the quarter, while the Nasdaq Composite outperformed, rising 21.4% over the quarter and 12% year-to-date. The STOXX Europe 600 was up 10% over the period, while the more energy-heavy FTSE 100 lagged, rising only 3.2%. The breadth of the rebound shows that investors increasingly looked through near-term geopolitical uncertainty and refocused on the fact that the broader earnings and economic backdrop remained largely intact.
This pattern is not unusual, as markets often follow a recognisable path during energy-linked geopolitical conflicts. First, volatility rises as investors begin to price the risk of disruption. Second, the start of conflict tends to trigger a sharper sell-off as markets discount a wider range of worst-case outcomes. Third, if the economic fallout proves contained, markets often begin to recover well before the conflict itself is resolved.
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