Bulls & Bears
Q2 2026 closed as the strongest quarter for US equities in six years. The S&P 500 gained 14.8%. The Nasdaq rose 21.4%. The Dow added 12.9%. And the Philadelphia Semiconductor Index posted the best quarter in its history at +87.8%. Those are the numbers that will appear in retrospectives. What happened in the four trading days that followed tells a more useful story.
Monday was triumphant. The S&P climbed 1.2%, the Nasdaq surged 2.1%, and the Dow hit a record 52,182 with a 0.6% gain. Tech was rebounding from its worst week since April. Alphabet rose 4.8% on its first session as a Dow component, replacing Verizon. Comcast announced it would spin off NBCUniversal. Super Micro Computer was raided in Taiwan over allegations of smuggling Nvidia chips to China. The backdrop was loud, and the mood was confident.
Tuesday closed the books on a half-year that left global stocks $7 trillion higher than where they started 2025. JOLTS job openings came in at 7.594 million, above expectations. South Korea's exports surged 70.9% year-on-year to $102.25 billion. Samsung and SK Hynix pledged a combined $1.3 trillion in chip investment. But gold was on track for its biggest quarterly decline since 2013, slipping below $4,000. Semiconductor stocks now account for 19.7% of the S&P 500's market capitalisation. Strategy Inc (formerly MicroStrategy) dropped 6.2% after Michael Saylor scrapped his long-standing policy of never selling Bitcoin.
Wednesday was the day the mood shifted. OpenAI engineers had halved inference costs, according to a report that hammered chip stocks and raised a question investors had been ignoring: what happens to GPU demand if software gets smarter? The SOX index fell 6.3%. AMD dropped 6.9%. Intel lost 9%. Applied Materials, Lam Research, Micron, and SanDisk all fell 10% or more. On the other side, Meta surged 8.8% after announcing "Meta Compute," a plan to monetise excess AI infrastructure by selling cloud compute to external customers. Apple, meanwhile, was reportedly negotiating with blacklisted Chinese chipmakers CXMT and YMTC. At ECB Sintra, Fed Chair Warsh conceded that "inflation risks have come down" but declined to offer forward guidance and vowed to maintain price stability above all else. ADP payrolls printed at just 98,000, well below the 118,000 consensus.
Thursday brought the real punch. Nonfarm payrolls came in at 57,000 against expectations of 114,000. The unemployment rate ticked down to 4.2% from 4.3%, but not for good reasons: the participation rate dropped to 61.5%, its lowest in more than five years. Leisure and hospitality shed 55,000 jobs. The prior two months were revised down by 74,000. Gold jumped 2.2% on the relief trade. The SOX index, combining Wednesday's and Thursday's losses, fell 11% across two sessions. Tesla reported record Q2 deliveries but the stock dipped. Rivian raised its full-year sales outlook. And in private credit, the cracks widened: Blue Owl Capital reported redemption requests of 18.8% and 38.1% in two of its funds, Blackstone restricted BCRED redemptions at 5%, and more than $14.5 billion sat trapped in illiquid structures. Markets closed Friday for Independence Day.
- S&P 500 +14.8% Q2 (best quarter in 6 years); Nasdaq +21.4%; SOX +87.8% (best quarter ever)
- Dow record 52,899 Thursday; +2.0% for the week; Alphabet first week in the index
- H1 2026: Global stocks $7T higher; S&P +9.5%, Nasdaq +12.8%; diversified portfolio strongest H1 since 2021
- NFP massive miss: +57K vs 114K expected; participation rate 61.5% (5-year low); leisure/hospitality −55K
- SOX −11% across Wed-Thu combined; AMD −6.9%, Intel −9%, AMAT/LRCX/MU/SNDK −10%+
- OpenAI engineers halved inference costs — report spooked chip sector on GPU demand implications
- Meta +8.8% on "Meta Compute" cloud infrastructure plans — monetising excess AI capacity
- Samsung & SK Hynix $1.3T combined chip investment pledge; South Korea exports +70.9% Y/Y
- Private credit stress: Blue Owl 18.8%/38.1% redemption requests; Blackstone restricts BCRED at 5%; $14.5B+ trapped
- Strategy Inc −6.2% after Saylor scraps "never sell Bitcoin" policy
- Warsh at Sintra: "inflation risks have come down" — but no forward guidance, price stability remains priority
- ISM manufacturing 53.3; hedge funds +18.4% Q2 (strongest on Goldman records)
- Anthropic in talks with Samsung for custom chip development
- Gold worst quarterly decline since 2013; −24% from Jan ATH of ~$5,589
- Rivian raised full-year outlook; Tesla record Q2 deliveries
- Iran: Khamenei funeral; Doha talks concluded without breakthrough but "positive progress" reported
| Index | Level | Week | Signal / Commentary |
|---|---|---|---|
| S&P 500 | 7,479 | +1.7% | Mon/Tue rally offset Wed/Thu chip wreck. Semis drove 87% of H1 gains (Barclays). Mag 7 lost ~2% total return. |
| Nasdaq Composite | 25,833 | +2.1% | Best quarter in 6 years (+21.4% Q2). Chip selloff Wed-Thu a sharp reversal of the trade that drove the rally. |
| Dow Jones | 52,899 | +2.0% | New record Thursday. Alphabet's first full week in the index. Cyclicals and defensives holding up well. |
| SOX (Semis) | — | −11% W-T | Best quarter ever (+87.8% Q2) then OpenAI efficiency report triggered 2-day rout. Chip stocks 19.7% of S&P 500. |
| ASX 200 | ~8,823 | Fut +52 pts | FY26: +3.2%. Materials carried everything (Metals & Mining +52%). Healthcare destroyed: CSL −52%, Cochlear −60%. |
| South Korea (KOSPI) | — | Strong Q2 | Stocks surged ~100% H1. Exports +70.9% Y/Y to $102.25B. Samsung/SK Hynix $1.3T chip investment pledge. |
Thursday's payrolls number was the data point the doves needed. Just 57,000 jobs created against a 114,000 consensus. The prior two months revised down by 74,000. Leisure and hospitality alone shed 55,000 positions. The headline unemployment rate fell to 4.2%, but only because people stopped looking for work: the participation rate dropped to 61.5%, a level not seen in more than five years.
The immediate market reaction was telling. Rate hike bets were pared sharply. Gold jumped 2.2%. The 2-year Treasury yield fell 4 basis points. Bond traders had spent the past month pricing in the possibility that Warsh would tighten further. A number this weak takes that off the table for now. Adam Sarhan captured the relief: this report "lets anyone concerned about an imminent Fed hike breathe a sigh of relief." Brian Jacobsen was more direct — "Warsh can wipe his brow. The labor market isn't overheating."
But context matters. ISM manufacturing printed 53.3, still in expansion territory. ADP payrolls at 98,000 on Wednesday had already hinted at weakness, though the ADP-to-NFP correlation remains inconsistent. Warsh himself, speaking at Sintra just hours before the jobs number, conceded that inflation risks have moderated but refused to offer any forward guidance. His structural reform of the Fed — the five task forces, the deliberate opacity — means that even a weak payrolls print won't produce a dovish pivot. He wants to see broad, sustained evidence. One month of weak data is not that.
For the rate path, the debate has shifted from "when does Warsh hike?" to "can he hold?" That is a meaningful change in tone, even if the policy outcome stays the same at the next meeting. The Fed funds rate sits at 3.50-3.75%, and it is likely to stay there through the summer unless the July payrolls report confirms a genuine cooling trend.
✓ Fed hike expectations pared sharply — bond market repricing toward "hold" through summer
Gold had its best single session in weeks on Thursday, surging 2.2% to $4,120 as the weak jobs report triggered a rush into safe havens and rate-sensitive assets. The move looks technical as much as fundamental. Gold just posted its worst quarterly decline since 2013, and at $4,120 it still sits 24% below the January all-time high near $5,589. Goldman Sachs maintains a $4,900 year-end forecast. UBS notes that gold miner risk/reward is improving at these levels. Whether this is a dead-cat bounce or the start of a recovery depends entirely on whether the jobs weakness is confirmed in subsequent reports.
Oil continues to stabilise at lower levels. Brent posted a 38% decline in Q2, the worst quarterly performance since the COVID collapse in Q1 2020. That followed a 94.5% gain in Q1. The whipsaw reflects the war premium being built and then demolished within six months. Saudi exports are running at approximately 90% of pre-war levels. US production hit a record 13.93 million barrels per day in April. On Tuesday, 34 verified crossings of the Strait of Hormuz were recorded. The supply picture has normalised far faster than most analysts expected, and the demand side is now the question.
Bitcoin remains range-bound between $59,000 and $60,000. Saylor's decision to abandon his "never sell" policy removed a psychological floor for the Bitcoin-as-treasury-asset thesis, and institutional flows have been muted since. The crypto market is waiting for a catalyst. None arrived this week.
South32 (S32) Transformational
Sold its aluminium business to Alcoa for up to $8.1 billion: $3.1 billion in cash, $1 billion in Alcoa shares, debt assumption, and contingent payments. Simultaneously approved the Sierra Gorda copper expansion ($725 million for a 25% capacity lift). This is the clearest portfolio transformation trade on the ASX right now. Out of smelters, into copper. The market should reward the discipline.
Ampol (ALD) Scale-up
Completed the $1.12 billion acquisition of EG Australia, adding 480 fuel and convenience retail sites. The deal doubles Ampol's convenience footprint and gives it critical mass in a market where scale determines margins. Integration execution is the risk. The strategic logic is sound.
IperionX (IPX) Pentagon Award
Landed a $9.54 million Pentagon award for titanium production. Small dollar figure, large signal value. The US defence supply chain is actively diversifying away from Chinese and Russian titanium sources, and IperionX is now on the approved supplier list. Critical minerals plays with government backing tend to re-rate before revenue arrives.
Perpetual (PPT) Bid Rejected
The board rejected EQT's $21.64 per share bid, valuing the company at approximately $2.5 billion and representing a 40% premium to the undisturbed price. The board says the offer undervalues the franchise. Maybe. But rejecting a 40% premium bid carries its own risk: if the business doesn't deliver the standalone value implied by the rejection, shareholders will remember.
Healthcare Sector FY26 Wreckage
CSL fell 52% across FY26. Cochlear dropped 60%. The sector remains 39% below its 12-month highs. For a sector that Australian portfolios have relied on for a decade, the damage is extraordinary. These are not broken businesses. They are broken valuations. The distinction matters for FY27.
Gold Miners — NST / NEM War Premium Fading
Northern Star and Newmont remain under pressure as gold's worst quarter since 2013 unwound the war premium that had driven prices to $5,589 in January. At $4,120, spot gold is still historically elevated, but the direction matters more than the level for producer sentiment. Hedge books will determine which names survive a further leg lower.
The ASX 200 gained approximately 3.2% for FY26, closing near 8,823. That headline number conceals a 470-plus percentage point gap between the best and worst performers. Materials did the heavy lifting, with the Metals and Mining sub-index surging 52%. BHP rose 62%. Lynas gained 110%. Macmahon was up 210%. Weebit Nano delivered 380%. Mineral Resources climbed 187%.
On the other side, healthcare was demolished. CSL lost 52%. Cochlear fell 60%. WiseTech collapsed 70%. These are companies that Australian fund managers have owned for years, and the sell-off has created genuine valuation opportunities if earnings stabilise in FY27. The question is whether the downgrades are done. For CSL and Cochlear, the answer is probably yes. For WiseTech, the governance overhang lingers.
Meta Platforms (META) +8.8%
"Meta Compute" changes the narrative. Instead of being just another hyperscaler burning cash on AI infrastructure, Meta is building a revenue line from it. Selling excess compute capacity to external customers means the capex has a monetisation path that doesn't depend entirely on advertising. The stock's single-day move was the largest among megacaps this week.
Nike (NKE) Beat & Recovery
Q4 revenue of $11.0 billion beat the $10.85 billion consensus. Adjusted EPS of 20 cents topped the 12-cent estimate. The stock recovered 5.1% after initial worries about China demand faded. Nike has been a consensus short for months. The beat doesn't fix the brand problems, but it removes the imminent earnings risk that was keeping buyers away.
Rivian (RIVN) Raised Outlook
Raised its full-year sales outlook on the back of improving production efficiency and order flow. Rivian remains unprofitable, but the trajectory is finally pointing in the right direction. The EV sector has been written off so many times that even modest operational progress gets rewarded.
Chip Stocks — SOX Index −11% Wed-Thu
The OpenAI inference efficiency report was the trigger. If software gets smarter, maybe you don't need as many GPUs. AMD fell 6.9%. Intel lost 9%. Applied Materials, Lam Research, Micron, and SanDisk all dropped 10% or more. The SOX had just posted its best quarter in history. The sell-off is a reminder that the AI hardware trade has a second side to it: demand destruction through efficiency gains.
Private Credit Cracks Widening
Blue Owl Capital reported redemption requests of 18.8% and 38.1% in two of its flagship funds. Blackstone restricted BCRED redemptions at 5%. More than $14.5 billion is trapped in structures that can't meet withdrawal demands. Private credit was supposed to be the "safe" alternative to public markets. The liquidity mismatch is now a front-page problem.
Strategy Inc (MSTR) −6.2%
Michael Saylor scrapped his long-standing policy of never selling Bitcoin. The move undermines the core thesis that made Strategy the proxy for permanent Bitcoin exposure. If the "diamond hands" CEO can change his mind, the premium the stock carries over its Bitcoin holdings becomes harder to justify. Shares dropped 6.2% on the announcement.
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Kai joined Andrew Coleman (TIP Group) to debate whether the AI-driven tech rally has created value traps among the megacaps, or if the sell-off is an opportunity.
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Covered BAP, SIQ, IAG, TLX, EIQ, AYA, IGO, AAI, SEK, TPG. Alongside Henry Jennings (Marcus Today).
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Covered NBIS, MU, NEE, CVX, GOLD, HCA, T, Nintendo, Vinci, RELX. Alongside Mark Moreland (value3).
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Deep dive on Meta's "Meta Compute" announcement and what it means for the AI infrastructure monetisation thesis. With Mark Moreland.
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With Rudi Filapek-Vandyck (FNArena) and Henry Jennings (Marcus Today). Key changes: removed Delta Lithium and Karoon Energy, added Cochlear and Mayfield Group, raised cash to 10%.
"This jobs report lets anyone concerned about an imminent Fed hike breathe a sigh of relief."
"Warsh can wipe his brow. The labor market isn't overheating."
"No signs of profit margins rising outside the tech sector."
"We are in the first or second inning of this revolution."
| Date | Company | Ticker | Focus |
|---|---|---|---|
| Tue 8 Jul | UnitedHealth Group | UNH | Healthcare bellwether; cost trend and membership growth |
| Tue 8 Jul | Citigroup | C | Credit quality, NII, capital markets revenue |
| Wed 9 Jul | PepsiCo | PEP | Consumer demand, pricing power, Frito-Lay volumes |
| Wed 9 Jul | Delta Air Lines | DAL | Travel demand, fuel costs, forward bookings |
| w/c 14 Jul | JPMorgan Chase | JPM | NII guidance, credit provisions, trading revenue |
| w/c 14 Jul | Goldman Sachs | GS | Trading, advisory, asset management flows |
| w/c 14 Jul | Bank of America | BAC | Consumer banking health, deposit trends |
| w/c 14 Jul | Wells Fargo | WFC | Mortgage trends, expense discipline |
| w/c 14 Jul | Netflix | NFLX | Subscriber growth, ad tier, content spend ROI |
| w/c 14 Jul | Broadcom | AVGO | AI networking revenue, VMware integration |
| w/c 22 Jul | Tesla | TSLA | Margins vs. volume; record deliveries but at what cost? |
| w/c 22 Jul | Alphabet | GOOGL | Cloud growth, AI talent exodus impact, Search resilience |
| w/c 28 Jul | Meta Platforms | META | Meta Compute revenue, Reels monetisation, AI capex guidance |
| w/c 28 Jul | Microsoft | MSFT | Azure AI growth rate, Copilot adoption, margin trajectory |
| w/c 28 Jul | Apple | AAPL | iPhone cycle, China demand, services growth |
| w/c 28 Jul | Amazon | AMZN | AWS pricing, retail margins, AI infrastructure spend |
The best quarter in six years was driven almost entirely by semiconductors. Barclays calculates that semis generated roughly 87% of the S&P 500's H1 gains. The Magnificent Seven, as a group, actually lost about 2% in total return. Think about that. The most-discussed stocks in the world went sideways while the index they dominate hit new highs. The "AI trade" has narrowed to a very specific set of companies: those making and supplying the hardware. Everyone else is still waiting for the revenue to show up.
Wednesday's OpenAI efficiency report showed the other side of that concentration. If inference costs can be halved through software improvements, the demand curve for GPUs shifts. Not eliminates. Shifts. The chip sell-off that followed was violent — the SOX lost 11% across two sessions — but the reaction was probably overdone. Efficiency gains expand the total addressable market for AI applications, which creates its own hardware demand over time. The short-term and long-term signals pointed in opposite directions, and the market traded the short-term one.
Thursday's jobs miss changes the macro conversation more than anyone expected a single payrolls report could. For weeks, the market had been pricing in the possibility that Warsh would tighten further. A 57,000 print — with participation at a five-year low and leisure/hospitality shedding 55,000 jobs — makes that argument much harder to sustain. The debate has moved from "when does he hike?" to "can he hold?" That shift is worth real money in rate-sensitive parts of the market.
For Australian investors, FY26 was the year of extreme dispersion. Materials carried everything. Healthcare got destroyed. A 470-plus percentage point gap between the best and worst performers means stock selection dominated asset allocation. Our view for FY27: the beaten-down names are where the opportunity sits. CSL at minus 52%. Cochlear at minus 60%. WiseTech at minus 70%. These are quality businesses at prices we haven't seen in years. The risk is further earnings downgrades, but the valuations are already discounting significant deterioration. We added Cochlear to the investment committee portfolio this week for exactly that reason.
The earnings calendar ahead is the real test. Banks report next week. Then megacap tech in late July. The market needs to see revenue, not just capex promises. If the hyperscalers can demonstrate that their hundreds of billions in AI infrastructure spending is generating returns, the rally broadens. If they can't, the SOX becomes the market's only engine — and single-engine flight plans tend to end badly.
