Global equities concluded the second quarter of 2026 on a positive note, driven by a fresh rally fueled by the ebbing of US-Iran tensions and sustained enthusiasm for technology and artificial intelligence. Major US indexes saw significant gains, with the Dow Jones Industrial Average posting a nearly 9% gain for the first half of the year, its best since 2021. The Nasdaq 100 surged 18% in the quarter, marking its second-best quarter in approximately 25 years and a nearly 19% year-to-date increase. The S&P 500 rose 9% in the first half, while the small-cap Russell 2000 jumped 21%, its best first-half since 1991. The Philadelphia Semiconductor Index recorded an 80% increase since late March, its best-ever quarter, with some chip stocks like Sandisk up 764% and Micron Technology up 301%.
Asian markets mirrored Wall Street's performance, with Asian stocks achieving their best quarterly gain in 17 years. Japan's Nikkei completed its best quarter on record, gaining around 38%, and South Korea's KOSPI surged over 70% in the quarter, largely due to demand for semiconductor companies. Taiwan also saw exceptional gains driven by AI-related investments. However, the Japanese yen depreciated to a four-decade low against the dollar, trading around 161.93 a dollar, prompting concerns about potential market intervention by Japanese authorities, especially as the Bank of Japan's recent rate hike to 1% had minimal impact.
The global market surge was underpinned by strong corporate earnings. Around 85% of S&P 500 firms beat earnings estimates, the highest percentage for the second quarter in five years, according to FactSet. For the current quarter, earnings are expected to grow by 23% year over year, with analysts anticipating a 21% price increase in the S&P 500 over the next 12 months. This robust performance occurred despite ongoing uncertainties such as the war, an oil supply shock, and inflation jitters, and a brief dip in AI stocks in June due to concerns they were overvalued. Oil prices also retreated, with Brent crude falling below $70 a barrel, after easing Middle East tensions.
Despite the strong quarterly performance, June saw some cooling in US stocks, with the S&P 500 logging its first losing month after two strong ones. However, AI stocks, including Nvidia, rebounded on the last day of the quarter, trimming their monthly losses. Microsoft, a heavy investor in AI, also saw its June loss cut to 17.2%. The resilient US job market, with more job openings than expected at the end of May, also contributed to overall economic stability, though consumer confidence improved less than anticipated. Investors are now looking to US-Iran talks and upcoming US jobs data for clues on future Federal Reserve interest rate policy, with expectations of higher-for-longer rates persisting.
