June was a strong month for Umbra's MPS range with all 31 MPS models outperforming their ARC benchmarks as risk assets recorded an exceptional second quarter, driven by easing geopolitical tensions, falling oil prices, and a sustained AI investment cycle. Global equities surged, select active managers delivered strong attribution, and fixed income markets broadly recovered first quarter losses, while the firm maintains a cautiously optimistic near-term outlook.
Q2 2026 proved to be one of the strongest quarters in recent memory for global markets. The primary catalyst was the announcement of a memorandum of understanding between the US and Iran, expected to lead to a gradual reopening of the Strait of Hormuz. This removed the most acute source of energy supply disruption, causing Brent crude — which had peaked at USD 120 per barrel in April — to fall approximately 38% from peak to trough, triggering a broad collapse in inflation expectations and providing a powerful tailwind for risk assets globally.
Global equities rallied sharply, with the MSCI AC World returning +14.9% for the quarter. The US led developed markets with the S&P 500 up +15.2%, supported by the strongest earnings season in recent years (85% of companies beating consensus) and continued AI-related capital expenditure momentum. Asia ex-Japan was the standout regional performer at +28%, driven by extraordinary semiconductor and memory earnings in South Korea and Taiwan, while the MSCI Emerging Markets index returned +24.1%, its strongest quarter since Q2 2009. Japan also performed well, with the Topix returning +14.4%, supported by an undervalued currency and corporate reform tailwinds.
The AI investment cycle remained a central theme throughout the quarter. US hyperscalers continued to raise capital expenditure guidance, with aggregate 2026 AI infrastructure spend now expected to reach approximately USD 700 billion. Crucially, the earnings tailwind from AI is broadening beyond pure technology — banks, industrials, and infrastructure are all increasingly benefiting — lending greater durability to the theme. Nonetheless, the concentration of index returns in a narrow group of large-cap semiconductor names remains a risk, and June itself saw a modest equity pullback of -0.8% as profit-taking emerged in some of the quarter's biggest winners.
Fixed income markets were broadly positive over the quarter, with the Bloomberg Global Aggregate returning +0.9%, broadly recovering Q1 losses. UK Gilts were the standout, returning +2.1%, as headline inflation came in below expectations at 2.8% versus 3.0% forecast and economic activity softened, with the composite PMI falling to 49.7. The Federal Reserve, under new Chair Kevin Warsh, held its policy rate unchanged at 3.50%–3.75%, while the ECB hiked for the first time after an eleven-month pause. Credit markets were constructive, with Emerging Markets USD Bonds returning +3.4% for the quarter.
Within alternatives, falling oil prices proved highly supportive for property (+8.8%) and infrastructure (+2.1%), with the latter also benefiting from strong demand for data centre and grid capacity linked to AI. Gold was the notable detractor, declining -12.7% over the quarter, though Umbra views this as cyclical rather than structural, noting robust central bank demand, persistent geopolitical risk, and the prospect of declining real yields as disinflation from energy prices feeds through.
