2026 Half Year Review

July 8, 2026, Hong Kong S.A.R.

In my blog post dated December 21, 2025, titled “Common Senses” and the 2026 Market Outlook, I outlined my forecast for the year 2026. Six months have passed, and I am due for a review of this first half and check how my forecasts are panning out.

First of all, as of this writing, the S&P500 index has returned 9.41% year to date, reaching a level of 7503, 3 index points above the high end of my forecast of 7,500. Directionally, I was right, albeit the market underwent a similar path as that of 2025: reaching a peak by the end of January, then a slide down to ~6,300 by the end of March due partly to the rotation out of technology names, partly to geopolitical uncertainties around the Iran war. Then, the Trump Put worked again, and a sharp rally happened, handling rather spectacular April and May in terms of returns to many investors. This April-May rally was led by large cap names, esp. large names in technology. The stratospheric rise of memory stocks such as Micron, Samsung, SK Hynix, SanDisk, etc., continued until mid June. But the market as measured by the S&P500 remained channel-bound from early June until today, and there have been signs that the rotation out of semiconductor and other high tech stocks to other sectors is happening again.

I have been always holding the view that the true exceptionalism of the U.S. lies in mostly two sectors: technology and financials. With the ongoing technology breakthroughs via AI innovations, the technology sector will likely remain rather strong, while the financial sector has been on par with the market. The spillover effect of AI investments into other sectors such as industrials definitely helps with stocks in these relevant areas; however, the first order benefits of AI investments still lie in the “picks-and-shovels” names, such as those in the semiconductor.

As a quantitative investment researcher who depends on highly efficient computational infrastructure for my own research and trading activities, I always believe that there is no end of demand for compute. Although the business models of AI-driven investments still need to be tested out, with the deep capital market in the U.S. (and a handful other countries in the world), whenever there are better, faster chips from a company like NVIDIA, the hyper-scalers and other enterprises will grab them. It is still too early to call the burst of this AI investment bubble.

That being said, it is always hard to change how people work. Although AI can help improve efficiencies of many operations, it always takes time for large and small enterprises to fully adopt AI, not mentioning that such adoptions will very likely replace human positions, a painful process that whole society have to collectively address. There have to be political maneuverers to ensure safety nets for a lot of people, esp. those who are working in those “knowledge-intensive” positions. In that regard, I do believe there will be more people who will learn coding – not less, at least in the near term – because whoever can learn even basic Python coding, can more easily use AI-assistance to improve their work efficiencies. Many AI startups are building tools for people to use. However, I believe the real changes have to come from human professionals’ own willingness and actions to leverage AI-assistance, from their own viewpoints and aiming at solving their daily problems. This will require knowing even basic coding knowledge in order to fully leverage the power of AI-assistances. I am launching a few training programs targeting professionals who want to learn basic Python coding and are eager to use AI assistance to help solving their business problems. Stay tuned on this front.

With such considerations, I believe the true investment themes at the macro level for the rest of the year are still mainly focused on technology, with a few sectors to be closely followed: financials, healthcare, and industrials. Consumer staples can be the fifth sector that I will consider, mostly on the defensive side because the U.S. consumers – esp. those in the upper “K” of the so-called “K-shaped economy”.

Globally, I believe Europe will see consistently more investments in many strategic sectors, such as defense, compute (including data centers), energy and industrials. With global energy market starts to ease after the MOUs between the U.S. and Iran (although volatility level remains elevated due to potentially repeated back-and-forth), emerging markets may start to stabilize; however, most of the money will likely remain staying in the U.S. and its major sectors mentioned above.

Bitcoin will remain lackluster for the rest of the year – there are just not many catalyst stories to tell, at least not yet. Gold will not slide too much due to the ongoing, general trend of de-dollarization (and the appreciation of currencies such as EURO and CNY). This also means that the Fed may be less likely in raising short-term rates during the second half of the year. Afterall, the current Trump administration does not like long-term rate to raise and want the short-term rate to be low as well, risking a stubbornly (yet not outrageously) inflationary state of the U.S. economy.

Finally, here are my outlooks for the remaining part of this year:

I adjust my forecast for the S&P500 index by year end to be within 7,000 and 7,700;
Technology sector will see further volatility, but it will appreciate as interest by investors in it remains intact; financials, healthcare (pharmaceutical included) and industrials will follow;
The Fed will more likely stay put with interest rate for the rest of the year, although rhetoric on inflation remains more hawkish than necessary;
Globally other than the U.S., capital will ebb and flow, esp. in emerging markets. It is worth monitoring the monetization of AI by Chinese hyper-scalers, as they face less scrutiny on capex and can be more shrewd in leveraging AI to improve bottom line; for Europe, my belief is that spending on defense and re-industrialization will increase; for Japan, it is important to monitor JGB rates, esp. in this summer;
Gold will stay volatile like it has been since early this year; however, the de-dollarization effort is on-going, and the USD depreciation is something the current U.S. administration may not be wildly against.

Happy investing!