The first half of 2026 has delivered geopolitical tension, an energy shock and stubborn inflation worries, yet markets have barely flinched, according to the mid-year outlook from LSEG Data & Analytics.
LSEG Data & Analytics experts note that the year opened with what the International Energy Agency called one of the largest oil supply disruptions on record. Unlike the aftermath of Russia's 2022 invasion of Ukraine, however, lower inflation, softer demand growth and more flexible energy supply chains have contained the damage.
Financial conditions across major economies remain close to long-term averages, even with government bond yields still elevated, the report stated. The defining story, the report argues, is not the shock itself but the market's capacity to absorb it.
Artificial intelligence remains the engine of equity leadership. LSEG Data & Analytics suggests 2026 may mark peak growth in AI capital expenditure rather than peak spending, with Meta, Alphabet and Microsoft still generating returns above their cost of capital.
Consumers, meanwhile, are evolving rather than retreating. Retail earnings started the year strongly, but spending is fragmenting: higher-income shoppers continue backing premium brands, middle-income consumers are growing choosier, and value seekers are shifting to discount and off-price retailers. Retailers with pricing power and disciplined inventory management look best placed for the second half.
Housing and mortgage markets are stabilising, supported by rising inventory, stable mortgage rates, recovering agency issuance and moderate home price growth, though affordability remains a hurdle. Credit markets across non-agency RMBS, CMBS and CLOs remain constructive, with robust issuance, but LSEG Data & Analytics flags risks including higher-for-longer rates, refinancing pressure and sector-specific stress in software-related lending.
The overarching message for H2 2026 is that selectivity, not broad market exposure, will separate winners from losers as investors adapt to a new operating environment defined by constant change.