Mid-Year Outlook: Hot Topics Shaping the Economic and Investment Landscape

As we move into the second half of 2026, attention is shifting across several themes. Below, with Joel Hancock, Benito Berber and Eric Benoist, we explore the three themes we believe will have the greatest impact on markets in the months to come. 

Commodity markets are entering a new phase. As geopolitical tensions in the Middle East ease, investors are paying less attention to disruption risk and more attention to the underlying balance between supply and demand. While geopolitical developments will remain relevant, as acute risk to supply infrastructure recedes, today’s price action is increasingly being driven by physical supply, inventory levels and the pace at which global trade flows return to normal.

In oil markets, the reopening of the Strait of Hormuz has allowed significant volumes of previously stranded crude to re-enter the global market. The release of these accumulated inventories has created a temporary oversupply, particularly across Middle Eastern crude grades, contributing to weaker prices in the near term. However, this dynamic is widely viewed as a question of timing rather than a structural shift in market fundamentals. Floating storage and stockpiled barrels are finite, and current flows suggest these inventories could be substantially reduced within a matter of weeks.

Attention is now turning to how quickly producers and logistics networks can restore normal production and transportation levels. Operational bottlenecks, shipping constraints and the practical complexities associated with restarting production after prolonged disruption may slow recovery of supply and could create tighter conditions during the summer months, particularly as demand recovers.

Natural gas markets have also proved to be more resilient than in previous periods of uncertainty. Unlike the severe disruptions experienced during the European energy crisis of 2022, the continent’s energy system is now more diversified and better equipped to absorb temporary supply disruptions. Increased renewable generation, improved nuclear availability and more effective storage management have all strengthened the region’s energy security.

Current gas storage levels are low, however, and will put a floor under the market. However, provided liquefied natural gas exports from major producers recover broadly in line with current expectations during the second half of the year, Europe appears well positioned to enter winter with adequate inventories. The principal risk lies in a slower-than-anticipated recovery in supply, which could reintroduce volatility into the market if storage injections lag. However, the central expectation remains one of relative stability.

Overall, the commodities outlook continues to improve. Markets are moving away from pricing geopolitical shocks and returning to a more traditional environment shaped by physical supply, logistics and seasonal demand. While risks remain, supply normalization, rather than sustained disruption, will be the dominant theme over the coming quarters.

As geopolitical concerns become less dominant, attention is increasingly turning towards the next major political milestone in the United States: the midterm elections. Historically, midterms have often served as a referendum on the sitting administration, and current political dynamics suggest a meaningful possibility of divided government emerging in Washington.

The most likely outcome remains a change in control of the House of Representatives, while the Senate is expected to remain under Republican control. Such a result would create a divided government, reflecting both historical midterm voting patterns and the structural challenges Democrats face in expanding their Senate majority.

From a market perspective, this may have less impact on the economic outlook than political headlines imply. A split Congress would likely introduce greater legislative friction and intensify political scrutiny of the administration, but it would not necessarily result in a fundamental shift in economic policy.

Efforts to reverse or moderate certain fiscal measures could gain traction, particularly in areas related to public spending and social programs. These debates may influence fiscal negotiations and contribute to ongoing discussions around budget deficits. Congressional investigations and confirmation processes for political appointments would likely become more contentious, creating a more challenging political environment.

The broader macroeconomic framework will likely remain largely intact. The President today relies more heavily on executive action to shape policy, and so the administration’s priorities no longer depend on congressional approval as much as they used to. As such, the main concern is uncertainty caused by political fighting, rather than the risk of major policy shifts. Markets have historically handled political gridlock well, especially when the underlying economy remains strong.

The US midterm elections are best seen as a source of political noise rather than a spark for major economic change. While the results will certainly shape the tone in Washington, any real impact on the economy will likely be gradual rather than dramatic.

Latin America’s political landscape continues to evolve. Just a few years ago, the region’s largest economies were largely governed by left-leaning administrations. More recently, several countries have shifted back towards the political center or center-right, reflecting growing public support for fiscal discipline and economic reform.

Brazil remains the key market to watch. With October’s elections expected to favor President Lula, investors will be closely assessing the implications for fiscal policy, public finances and investor confidence. Given Brazil’s importance within the region, developments there are likely to shape not only the country’s economic outlook but also broader sentiment towards Latin American assets.

Artificial intelligence remains one of the market’s defining investment themes. Even as geopolitical tensions and commodity markets have dominated headlines, investor attention has repeatedly returned to AI. The key question is whether the recent enthusiasm represents another speculative bubble or the early stages of a technological shift that still has years to run.

So far, the evidence points more toward the latter. Unlike previous bubbles, gains have not been indiscriminate. Leadership has shifted across different parts of the AI value chain, and investors have become increasingly selective about where they see long-term value.

Valuations among many leading companies have also become more reasonable than they were during the initial surge of enthusiasm. At the same time, the center of gravity within the AI investment story appears to be broadening. Rather than focusing exclusively on a small group of hyperscale technology companies, investors are increasingly recognizing opportunities across semiconductors, memory technologies, optical networking, power infrastructure and advanced computing architectures.

This reflects the reality that artificial intelligence depends upon a vast supporting ecosystem. The expansion of AI capabilities requires substantial investment in computational power, energy infrastructure, connectivity and specialized hardware. As adoption accelerates, capital continues to flow into these enabling technologies, creating new areas of opportunity beyond what was originally anticipated.

Questions around regulation, technology access and digital sovereignty are also becoming increasingly important. Restrictions on the distribution of advanced technologies have highlighted the strategic importance of developing domestic AI capabilities and reducing dependence on a small number of providers. This theme is particularly relevant in Europe, where efforts to strengthen local technology ecosystems continue to gather momentum.

Attention is increasingly turning towards the infrastructure required to sustain future growth. Energy consumption, data center capacity, land availability and broader resource constraints are becoming critical considerations as AI deployment scales.

While pockets of excess valuation may exist, the broader outlook is that the current AI cycle remains fundamentally supported by technological progress, corporate investment and expanding commercial adoption. The discussion is evolving beyond the question of whether AI matters, towards a more nuanced debate about where value will ultimately be created within the ecosystem and how the infrastructure supporting that growth will develop over time.