What happened
The S&P 500 rose 15% in the first quarter of 2026, its best quarterly performance since Q2 2020. For the first half of the year, the index is up 9.6%. The rally has been driven primarily by technology and AI-related stocks, even as the geopolitical situation in the Middle East created periodic uncertainty. Wall Street now expects S&P 500 earnings to grow 26% year-on-year in Q2 2026.
Why it matters
The S&P 500 is the benchmark for global equity markets. When it performs this strongly, it lifts sentiment across asset classes worldwide — including the FTSE 100 and European indices. However, such a strong run also raises the question of whether valuations have run ahead of fundamentals, especially heading into an earnings season where expectations are very high.
Explained simply
Imagine the stock market as a long-distance runner. After a gruelling stretch in 2025, the runner found a second wind in early 2026 and sprinted hard. Now the runner is ahead of the pace they set at the start of the year. The question is whether this pace is sustainable — or whether the runner needs to slow down and catch their breath before the next leg of the race.
What it means for you
If you hold a global or US tracker fund in your ISA or pension, the first half of 2026 has likely boosted your returns significantly. This is a good moment to review your asset allocation — if US equities now make up a larger share of your portfolio than intended, consider rebalancing into bonds or other markets. Locking in some gains before Q2 earnings season, when volatility typically picks up, is a sensible move for risk-conscious investors.
