An interview with:
Daniel Babington
Portfolio Manager at TAM Asset Management (TAM)
Daniel joined in TAM in 2020 after graduating with first-class honours in Economics. Recognised as a 2024 Citywire Top 30 Under 30 and multi-award finalist, Daniel combines expertise and passion to deliver impactful sustainable investment strategies, addressing global challenges while driving financial returns for investors.
About TAM
Part of the Amber River Group, TAM is an award-winning discretionary fund manager (DFM) with over 16 years’ active investing and fund research experience. They have developed a diverse range of model portfolios for clients, including active, passive, sustainability-focused and Sharia-compliant investment strategies.
Global markets continued to deliver positive returns during the second quarter (Q2) of 2026, although the journey was far from smooth.
The three months between April and June were marked by sticky inflation and uncertainty over interest rates, driven by rising energy prices amid heightened tensions in the Middle East.
However, confidence improved towards the end of the quarter as tensions eased following a US-Iran agreement, which caused oil prices to fall sharply.
Q2 was another reminder that markets can move quickly in response to global events, but that focusing on your goals and long-term market trends instead of short-term movements is the most effective approach for steady growth.
What happened in Q2 2026
Geopolitics and technology were the key drivers of market movements during Q2, and global equities delivered strong returns overall despite periods of volatility.
The US market continued its strong start to the year. The S&P 500 rose 15.2% between April and June, thanks to high demand for AI and electrical equipment companies. However, towards the end of the quarter, renewed caution about the high valuations of AI companies led to some volatility.
UK markets had a slow Q2 but still delivered positive returns. The FTSE All-Share Index returned 4.7% across the quarter and is at 7.2% year to date, making it the weakest-performing major equity market so far this year. This is largely due to the UK market’s relatively limited exposure to technology stocks, although its greater weighting towards energy companies provided some support.
European markets were strong, as investors became more optimistic about company earnings and lower oil prices towards the end of the quarter further improved sentiment. The MSCI Europe ex-UK Index returned 14.4% during the quarter.
Elsewhere, Asian markets were the standout performers of Q2, with the MSCI Asia ex-Japan Index returning 27.8% and emerging markets gaining 24.1%. This was largely due to strong demand for semiconductors and electrical equipment, both of which are key to AI development. Japan also performed well, with the TOPIX Index rising 14.4%.
“Confidence improved towards the end of the quarter as tensions eased following a US-Iran agreement, causing oil prices to fall sharply.”
Inflation remained above target in many regions, and economic growth readings were mixed
Inflation remained above the 2% target in most regions during Q2.
In the UK, the latest figures show inflation was at 2.8% in May, unchanged from April. However, the Bank of England (BoE) warned that inflation could still rise further due to ongoing tensions in the Middle East, so it left interest rates unchanged at 3.75% at its June meeting.
US inflation rose to 4.2% in May, up from 3.8% in April, marking the third consecutive monthly rise. Much of this was attributed to higher energy prices linked to the conflict with Iran. The Federal Reserve left interest rates unchanged at 3.5% – 3.75% at its latest meeting – the first led by the new Chair.
In the Eurozone, inflation fell to 2.8% in June from 3.2% the previous month, its lowest level since the outbreak of the Iran conflict. However, concerns that higher energy prices could keep inflation high prompted the European Central Bank to raise interest rates to 2.25% and revise its inflation forecasts for 2026 and 2027 upwards.
The latest economic growth readings present a mixed bag.
The Eurozone economy contracted by 0.2% during the first quarter of 2026, its first decline since late 2022. This was largely due to a sharp decline in demand for Irish exports, which skewed the data for other countries that broadly saw positive readings.
Elsewhere, there was growth. The UK economy expanded by 0.6% in the first quarter, up from 0.1% in the final quarter of 2025, marking the strongest growth in over a year. The US economy was a strong outlier, growing by 2.1% in the first quarter, up from 0.5% at the end of 2025.
The case for diversification
The varied market performance across Q2 highlights the value of diversification.
With more than a 20% difference in returns between some major indices, if you were heavily concentrated in one area, you may have missed out on stronger gains elsewhere. Likewise, volatility in the US market, driven by fluctuating confidence in AI stocks, shows the risks of putting too much weight on a single sector.
Diversification remains one of the most effective ways to ensure a smoother journey to long-term success. By spreading your investments across different sectors, regions, and asset classes, you can reduce the risk of being overly concentrated in one area while also opening yourself up to wider opportunities.
“The S&P 500 rose 15.2% between April and June, driven by strong demand for AI and electrical equipment companies.”
Looking ahead
As we move into the second half of 2026, there are a few key events and themes to keep an eye on:
- Inflation and future interest rate decisions
- Oil prices and developments in the Middle East
- Investor confidence in AI-related companies
- Economic growth figures
- Market reactions to political developments, including the inauguration of a new UK Prime Minister
Key takeaways
Markets delivered positive returns across the quarter and were particularly strong in some regions.
Geopolitical events often drive short-term market performance, but the quarter also showed how quickly investor sentiment can improve when uncertainty begins to ease.
Maintaining a well-diversified portfolio, avoiding unnecessary reactions to short-term market movements, and remaining focused on long-term financial goals continue to be the foundations of successful investing.
Get in touch
If you have any questions about your financial plan or how the markets may affect it, please get in touch with your Amber River adviser.
To set up an initial appointment with an Amber River financial planner, 0800 915 0000. Alternatively, you can use our contact form to arrange an appointment.
This is important:
We’ve written this article purely for general educational purposes. It’s not investment advice, or an invitation or inducement for you to invest your money. The information in the article can go out of date over time too – thanks to law and tax rule changes.
Your situation will be unique to you, and that’s why you should always seek personalised advice from a qualified financial adviser before taking any action.
