Market Update: Second Quarter 2026

The second quarter of 2026 was a strong quarter. Shares did well around the world. Bonds also gave a positive return, but a smaller one: the conflict in the Middle East raised fears of higher inflation, and that pushed bond prices down for a while.

Looking back at Q2 2026: AI is still the engine behind shares, bonds positive but with ups and downs

In the first quarter of 2026, the war between the US and Iran still weighed on the markets. In the second quarter, investors paid less attention to it. Share markets around the world rose strongly, helped by the continued growth around AI and strong profits at many companies.

Emerging markets did best. Taiwan and South Korea stood out once again. These countries play a big role in the AI industry and profit from the worldwide demand for chips and technology. But the rise was not spread evenly across all emerging markets: big players such as China actually fell.

Bonds also ended the quarter with a positive return, but prices moved up and down. The conflict pushed energy prices up, and with them the fear of inflation. Halfway through the quarter, interest rates on government bonds rose to their highest level in years. That is bad news for bonds: when interest rates rise, bond prices fall. When hopeful signs came in June about talks between the US and Iran, rates fell again. The situation remains unpredictable.

Corporate bonds from financially healthy companies (known as "investment grade bonds") did better than government bonds. The companies themselves are in good shape: the unrest came mainly from interest rates, not from problems at the companies.

The ECB raised interest rates: what does this mean for your portfolio?

On June 11, tthe European Central Bank (ECB) raised its main interest rate from 2.00% to 2.25%. It was the first rate increase since September 2023. The reason: the conflict in the Middle East pushed energy prices up, and with them the risk that inflation keeps rising. The ECB now expects inflation to be higher than previously thought, and economic growth to be lower.

A higher interest rate is the ECB's main tool to slow down inflation. Borrowing money becomes more expensive and saving becomes more attractive, so people and companies spend less. The economy cools down a little and prices rise more slowly. Financial markets expect more rate increases later this year.

For you as an investor, a rate increase has two sides. In the short term, bond prices can fall when rates rise. On the other hand, new bonds will pay a higher interest rate from now on. In the long term, that actually improves the expected return on the bond part of your portfolio.

Shares can also suffer from higher rates, because borrowing becomes more expensive for companies. This quarter, we saw little of that: profits stayed strong and share markets kept rising. So a rate increase is no reason to change your strategy.

Our message: stick to your strategy

Big news around the world often feels like a reason to act. But usually, that is not a smart move. Anyone who stopped investing after the weak first quarter of 2026 missed a strong quarter. Nobody can predict when markets will rise or fall. So stick to your plan.

Stay focused on your long-term goal

One quarter says little about how your money will grow over ten, twenty or thirty years. Ups and downs are part of investing, just like periods of unrest in the world. What matters in the long run: keep investing regularly, make sure your risk level fits your situation, and don't let the news of the day blow you off course.

Investing involves risks. You can lose (part of) your investment. Past performance is no guarantee of future results.