H1 2026 Cockpit Report

The Cockpit · H1 2026

Edito

When I sat down to read the first half of 2026 from an investor's perspective, a famous line from the legendary investor Peter Lynch echoed loudly in my head:

Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.Peter Lynch

On paper, the half gave every reason to brace for the worst. War broke out between the United States, Israel and Iran at the end of February, the Strait of Hormuz was throttled and oil briefly touched $126 a barrel. Gold ran to a record and then suffered its worst quarter since 2013. A new chair took the controls at the Federal Reserve, the Supreme Court struck down the administration's tariff regime, private credit spent the half under a harsher light, and Bitcoin fell by roughly a third over the half, more than halving from its late-2025 record.^{[1,2,4,7,12,16,37,38]}

What actually happened was far less dramatic than the headlines threatened. Markets did fall: in March, as the war unfolded, the S&P 500 dropped about 5% by month-end, and Europe, more exposed to the energy shock, fell close to 8%, its worst month since 2020 (see the Main Assets tab). But the correction lasted barely a month, and a strong rebound followed.^[46,47]

And it was no ordinary rebound. The second quarter was the best in years for US equities: the S&P 500 and the Nasdaq posted their strongest quarter since 2020, the Dow its best first half since 2021, and the Russell 2000, made up largely of domestically focused US companies rather than multinationals, its best first half since 1991, more than thirty years. Semiconductors had their best quarter on record. Korea's market roughly doubled and Taiwan's rose close to 60%, both lifted by the same force: the enormous sums hyperscalers are pouring into AI infrastructure, which created a bottleneck in memory and sent Micron, SanDisk, Samsung, SK Hynix and Seagate to extraordinary returns. Beneath the prices, the profits were real: S&P 500 first-quarter earnings grew 28.6% from a year earlier, the strongest in more than four years.^{[22,24,26,27,39,40,41,42,43]}

Monetary policy, too, was quietly more supportive than the headlines suggested. The Fed held its rate, and markets even began to price a hike, yet the M2 money supply kept rising through the half and the Fed's balance sheet, after years of shrinking, began to expand again. Liquidity, in other words, was not draining.^[44,45]

None of this means the sky is clear. The ceasefire and the partial reopening of Hormuz still look fragile. And the very engine of these returns carries its own risk: the hyperscalers' capital spending has crowded out share buybacks, one of the largest single contributors to equity returns over the past decade. Net equity supply is turning positive for the first time in a generation, with Alphabet issuing stock, a wave of giant listings (SpaceX already public, OpenAI and Anthropic expected) and heavy bond issuance from the same names. That capital will have to earn a return to justify itself, and precisely how much it will earn is difficult to know.^[1,34]

This report sells nothing. What it offers is the chance to sit down and read your instruments, so that you fly your own plane with as much control as possible and make educated decisions, wherever it is you want to go.

For investors whose portfolios span several asset classes, I built seven model portfolios that show how classic passive strategies, each set to a different risk budget, behaved through the half (see the Portfolios tab). I would encourage you to experiment with them. They are not recommendations but references: a way for serious investors to measure their own returns against benchmarks matched to their risk profile. What you will find in that tab is a full analysis instrument, with customisable periods, expenses and rebalancing rules, alongside detailed statistics and a contribution breakdown for each portfolio.

Jonathan Castella, CFA

The Cockpit · H1 2026

The Seven Model Portfolios

Seven classic portfolios, from Fixed Income through to Equity, read as references rather than recommendations. Each is passive, total-return and rebalanced quarterly, indexed to 100 with a simulated-expense slider. The graph, the performance and risk statistics, the contribution by holding and the full compositions sit below, frozen as of 30 June 2026. They are a risk dial to set a real allocation against, not products.

Graph

Statistics

Compositions

Contribution

The Cockpit · H1 2026

Top News

The developments of the first half that mattered most for investors and financial markets. The numbered references point to the source list in the Methodology and sources tab.

War returns to the Gulf. On 28.02.2026, after the 27 February US close, the United States and Israel launched surprise strikes on Iran, and Iran moved to close the Strait of Hormuz, through which roughly a fifth of the world's seaborne oil passes. Brent, which began the year near $61, crossed $100 for the first time in four years (08.03.2026) and spiked to an intraday $126 on 30.04.2026, its highest since 2022; a US-Iran framework signed on 17.06.2026 reopened the strait, and Brent fell back to about $74 by 30 June. The ceasefire is real but fragile.^[1,2,3]

Gold's round trip. Gold ran to an all-time high near $5,586/oz on 29.01.2026, up roughly 29% in a matter of weeks on war fear, a soft dollar and record central-bank buying. Then it reversed hard: the second quarter was its worst since 2013, down about 16%, and it ended the half near $4,015, roughly 7% below where it began the year. A Fed that stopped signalling rate cuts did most of the damage, but the war compounded it: the oil spike widened energy importers' deficits, and Turkey sold gold to defend the lira while a cash-strapped Russia sold to cover a budget hole left by collapsing oil revenue.^[4,5,6]

A new hand on the monetary controls. Kevin Warsh was nominated to chair the Federal Reserve on 30.01.2026, confirmed by the Senate 54-45 on 13.05.2026, and sworn in on 22.05.2026, succeeding Jerome Powell, who kept his Board seat. The Fed held its policy rate at 3.50-3.75% through the half, and by the June meeting its projections had erased earlier signals of cuts, citing the Middle East and energy-driven prices.^[7,8]

Central banks part ways. The US Fed held at 3.50-3.75% and the Bank of England held at 3.75% (its vote drifting hawkish), while others tightened into the oil shock: the ECB delivered its first hike since 2023 on 11.06.2026, and the Bank of Japan raised its rate to 1.0% on 16.06.2026, the highest since 1995. Japan's consumer inflation stayed moderate near 1.7%, but producer prices rose 6.3% in May and a weak yen did as much as prices to force the BoJ's hand.^[9,10,11]

Private credit under the microscope. The collapse of First Brands, whose January 2026 bankruptcy revealed roughly $2.3bn of fabricated receivables, kept a harsh light on the $1.5tn-plus private-credit market. On 07.04.2026 Jamie Dimon warned that lending losses would run "higher than expected" as credit standards weakened; Moody's cut its outlook on the business-development-company sector to negative the same day, and the Financial Stability Board flagged the market's opacity in a report on 06.05.2026. Reported default rates stayed around 2 to 3%, so the half's story was rising anxiety and retail-fund redemptions, not yet a systemic break.^[12,13,14]

An unusually strong earnings season. S&P 500 first-quarter earnings grew 27.7% year over year (blended, 89% reported as of 08.05.2026), the fastest since Q4 2021 and a sixth straight quarter of double-digit growth, led by the largest technology companies.^[15]

Washington's tariffs, struck down and improvised. On 20.02.2026 the Supreme Court ruled 6-3 that the emergency-powers (IEEPA) tariffs at the heart of the trade agenda were unlawful, leaving the separate steel, aluminium and auto tariffs intact. Within days the administration reimposed a blanket import surcharge under Section 122 of the Trade Act, raised to its 15% ceiling, but that power is capped at 150 days: a trade court struck it down in May, an appeal keeps it collecting for now, and it lapses on 24.07.2026 unless Congress acts, which few expect. Overhanging it all is as much as $175bn of duties collected under the struck-down power that importers are lining up to reclaim.^[16,17,18]

The AI capital surge, and an inflection in revenue. Anthropic raised a $30bn Series G at a $380bn valuation (12.02.2026), then a $65bn Series H at $965bn (28.05.2026); OpenAI closed a mega-round that reached $122bn at an $852bn valuation (31.03.2026, after a $110bn/$840bn first close on 27.02.2026). Beneath the valuations, revenue inflected: Anthropic's run-rate rose from about $9bn at end-2025 to roughly $47bn by May 2026, and both companies filed confidential IPO paperwork in June.^[19,20,21]

The hyperscaler capex wave. Microsoft, Amazon, Alphabet and Meta guided to roughly $725bn of capital spending in 2026, up about 77% from some $410bn a year earlier, most of it AI data centres. The figures are large enough to reshape corporate cash flows and even the equity-supply picture, and with outlays running ahead of AI revenue, investors began in June to weigh the payback.^[22,23]

Semiconductors' best quarter on record. The Philadelphia Semiconductor Index rose 87.8% in the second quarter, its largest quarterly gain since at least 1994, as AI demand pulled memory into shortage. Nvidia reported record quarterly revenue of $81.6bn (20.05.2026); Micron, SK Hynix and Samsung each posted record results as HBM capacity was diverted from conventional memory, and SanDisk, Western Digital and Seagate sold much of their 2026-2027 output ahead.^[24,25,26]

Korea's melt-up. The Kospi roughly doubled over the half, the best showing of any major market, closing near 8,476 on 30.06.2026, driven by the same memory-and-AI supercycle powering Samsung and SK Hynix.^[27,28]

Frontier AI meets export control. On 12.06.2026 the US Commerce Department ordered Anthropic to cut foreign nationals off from its two most capable models, Claude Fable 5 and Mythos 5, forcing a brief worldwide shutdown before the controls were lifted around 30 June. Coming days after a White House order creating a voluntary security review of frontier models, it read to many as export licensing by another name, and it deepened Europe's unease about depending on American AI.^[29,30,31]

The largest IPO in history. SpaceX priced its offering at $135 per share (11.06.2026) and began trading on the Nasdaq the next day, raising about $75bn at a valuation near $1.75tn and closing its first session up 19%. It surpassed Saudi Aramco's 2019 listing as the biggest IPO ever.^[32,33]

Companies flood the capital markets. After two decades of shrinking share counts, US net equity supply (new shares issued minus buybacks) is on track to be roughly flat in 2026 on Goldman Sachs Research estimates, the first year it has not been negative since 2003, helped by Alphabet's roughly $85bn stock sale, its first net issuance in over a decade, and a record year of listings. The debt market told the same story: Alphabet and Meta sold jumbo bonds to fund AI (Alphabet's multi-currency raises included a 100-year note and Meta priced about $25bn in April), and a freshly public SpaceX followed with a $25bn debut bond on 23.06.2026.^[34,35,36]

The Cockpit · H1 2026

Methodology & sources

This report is a set of instruments, not a set of instructions. What follows is how each figure is built, where the data comes from, and how it is checked, so that any reader can trace a number to its origin and judge it independently.

How the figures are built

The seven model portfolios and the asset-class series are total-return, indexed to 100 at the start of each period, and expressed in US dollars. Where a simulated expense is shown, it is applied as a daily drag on net asset value, and rebalancing follows the frequency selected in each widget. Yields, spreads and inflation are plotted as reported, without adjustment.

Sources

The data in this report comes almost entirely from two public sources: Yahoo Finance for market prices, and FRED, the Federal Reserve Bank of St. Louis, for the macro series. Fund fact sheets are the reference used for cross-checking. This is public, end-of-day data, not an institutional terminal feed.

Market prices and total returns: Yahoo Finance, using dividend-adjusted closing prices for each ETF and index.
US Treasury nominal and real (TIPS) constant-maturity yields, and the effective federal funds rate: FRED (Federal Reserve Bank of St. Louis).
Moody's seasoned Aaa and Baa corporate bond yields, and ICE BofA investment-grade and high-yield option-adjusted spreads: FRED.
US consumer price index (CPI-U): US Bureau of Labor Statistics, via FRED.
Portfolio weights and fund characteristics: the respective ETF issuers' published fact sheets, used for cross-checking.

News and events

Sources for the Top News items, numbered to match the references in that tab.

How it is checked

This report is produced with the help of an AI assistant working under the supervision of Jonathan Castella, CFA, who authors it and is responsible for what it says. Before publication, the underlying data passes hygiene checks, and individual figures are spot-checked against issuers' fact sheets and the primary series. These steps reduce error, but they do not eliminate it: mistakes remain possible.

Corrections and liability

This report is educational. It examines frameworks, regimes and history; it is not investment advice, and it recommends no security, fund or allocation. Nothing here should be relied upon as the basis for a financial decision, and the author accepts no liability for any decision taken, or any consequence arising, from its use.

Accuracy matters to the publication. If you find an error, or have a correction, a question or a comment, it is welcome: write to socrates@socrates-on-investing.com.