The first half of 2026 has been so out-there that even Nostradamus would have had a hard time foreseeing it. While full of peculiar predictions, anyone reading The Nice and Accurate Prophecies of Agnes Nutter, Witch from Good Omens – a book in which the character Agnes Nutter forecasts the future with a 100% success rate – would have taken one look at the first half of 2026 and thought it was more bonkers than usual.
It took just days for things to get started, with the US capturing former Venezuelan president Nicolás Maduro on 3 January. Then, at the end of February, America and Israel launched strikes on Iran, leading to the closure of the strait of Hormuz and causing energy prices to spike.
Outside of US military operations, Kevin Warsh replaced Jerome Powell as Federal Reserve chair, while Keir Starmer resigned as UK prime minister after poor polling numbers piled pressure on the Labour leader. Former Greater Manchester mayor Andy Burnham is widely expected to replace him in the second half of the year.
On markets, Elon Musk became the world’s first trillionaire after the successful launch of his loss-making space exploration company SpaceX. Sitting on such a high valuation that one needs to fly in a rocket just to get to its summit, it is the latest in a swathe of AI exuberance.
Take, for example, the semiconductor space. TSMC – the world's largest chipmaker – was up 42.3% in the first half of the year. It is now the largest stock in the emerging markets by some way, accounting for 15% of the MSCI index.
Korean companies Samsung Electronics and SK Hynix – also in the semiconductor space – have rallied hard and now account for 15% of the index combined (8.2% and 7.7% respectively).
It means Taiwan and Korea are now larger weightings in the MSCI Emerging Markets index than China and India, easily the two largest countries in the asset class by economy size.
Looking forward to the second half of the year, things are not guaranteed to be calmer. Let’s look at the known unknowns.
Firstly, there needs to be a conclusion to the tentative peace talks between the US and Iran. At present both sides are negotiating seemingly in good faith, but both are volatile and it does not seem like it will take a lot for either of the two sides involved to walk away.
Much of the returns made in the second quarter of the year – when markets rebounded strongly having fallen in the wake of the war – would surely retreat in such a scenario.
In the UK, although Burnham is widely expected to become the next prime minister, his chancellor is a big topic of debate and one that could shape the future of the domestic market and for investors’ own tax positions of everyone in the country.
Then there are the markets themselves. Private equity backers of SpaceX will be able to sell some of their shares from mid-August, which could dent the rocketing share price.
It is not hard to imagine the stock riding a momentum wave lower as people rush for the exits, which would have a significant impact on the future expected IPOs of Claude owner Anthropic and ChatGPT creator OpenAI.
If SpaceX drops, will these companies even launch? These three companies could be the ultimate litmus test for the future of the AI trade.
And that is before we get to the unknowns – the things even Agnes Nutter would not have foretold. For example, can the semiconductor trade continue? Some active fund managers have already moved on to the industrial sector and the data centre roll-out, looking for the next opportunity from the blossoming technology.
Investors may wish to look at the US hyperscalers for guidance. After a barnstorming 2025, in 2026 they have been largely forgotten, with the ‘Magnificent Seven stocks’ flat on the year so far as attention has moved to other parts of the AI trade. Will the same happen to the semiconductor behemoths that are flavour of the month right now?
Markets are a crazy place. It feels too early to call anything like a top, while also recognising that there are so many ways in which the house of cards can come crashing down.
While the likes of Nostradamus and Agnes Nutter may be able to see it all coming, the rest of us will just have to wait and see.
Jonathan Jones is editor of Trustnet. The views expressed above should not be taken as investment advice.