This week in the markets: Investors pause for breath after a dramatic six months

We’re officially in the second half of 2026, and - after months of political drama at home, conflict abroad, IPO excitement, and oil shocks - investors will be hoping for a breather this week. Economic updates are thin on the ground and earnings season won’t begin in earnest until next Monday. So there’s no better time to reflect on the past six months - and what they tell us about the future.

Global stock markets had a great start to 2026, despite lots of risks. The S&P 500 has just posted its best quarter since 2020, while European stocks are trading at fresh highs. Emerging markets have stolen the show, though, climbing by roughly a quarter over the past six months. The rise has been fuelled by South Korea, which has jumped by almost 90% since January.

European equity markets got off to another strong start this morning, although there was a bit of bumpiness in Asia.

There has been a clear trend so far this year: despite moments of intense volatility, demand for artificial intelligence stocks is booming. Investors have been snapping up companies like Samsung, which makes AI memory chips, and ASML, the Dutch company that builds the machines that build the chips. US semiconductor giants are also flying, and don’t forget the new names. After its IPO last month, SpaceX will join the Nasdaq 100 index on Tuesday.

The question is: will it continue? For a long time, concern centred around stock market valuations. In other words, people worried that share prices had risen too far relative to company earnings. Recently, though, focus has shifted onto the earnings themselves. Wall Street profit forecasts are surging and some people fear that companies will eventually disappoint shareholders.

Only time will tell, and many tech giants won’t be reporting results until the second half of July. There are some signs of nervousness, though. For example, the S&P 500 Equal Weight Index reached an all-time high last week - and is ahead of the normal S&P 500 year to date. Amid all the AI excitement, it seems some investors are looking to diversify away from the biggest names.

The stock market isn’t the only source of uncertainty. Interest rates have been attracting a lot of attention this year, and the narrative is extremely changeable. For a while, the Middle East conflict threatened to usher in a series of rate hikes. Then, a peace deal was announced, and central banks were back to being quizzed about rate cuts.

On Wednesday this week, America’s Federal Reserve will publish minutes from its latest monetary policy meeting and investors will scour it for clues. Traders reined in predictions of interest rate hikes last week after US jobs data proved weaker than expected - but it’s still all to play for. At the annual European Central Bank conference last week, new Fed chair Kevin Warsh was tight lipped about his plans.

Over in the UK, the Bank of England will announce its next rate decision on Thursday 30 July.

The UK has plenty going on in the meantime. Andy Burnham will edge closer to Number 10 this week, as nominations for Labour leadership open on Thursday. Candidates must secure the nominations of at least 81 MPs and, at the moment, Andy Burnham appears to have overwhelming support. If no rival emerges, the contest could be over by mid-July.

So far, markets have seemed fairly relaxed about the prospect of Andy Burnham in Number 10, but personal investors are keen to know more about his plans for tax - particularly for property tax. 

On the world stage, leaders will gather in the Turkish capital of Ankara on Tuesday and Wednesday for the 2026 Nato summit. A key issue will likely be defence spending, as fighting continues to rage between Russia and Ukraine more than four years after Russia’s invasion.