In Q2 2026, global economies and financial markets were shaped by sticky inflation, uneven economic growth, and heightened geopolitical uncertainty. Inflation continued to pose a challenge across several advanced economies amid the surge in energy prices in later part of Q1 and Q2 resulting from Middle East tensions. This complicated the disinflation process and reinforced a cautious stance among major central banks. Economic activity remained resilient in the United States but softened across Europe, the UK, and China, reflecting weaker industrial production and subdued consumer demand. Financial markets experienced elevated volatility as investors repeatedly reassessed the path of interest rates amid shifting macroeconomic data. Commodity prices, particularly oil and gold, softened supported by progress on geopolitical fronts, while equity market performance varied across regions and sectors. Overall, Q2 2026 highlighted the delicate balance between uncertain macroeconomic fundamentals and persistent geopolitical and inflation-related headwinds.
The key macroeconomic indicators across major economies reflected a mix of resilience and fragility amid evolving policy and geopolitical dynamics. In the United States, growth remained relatively robust, supported by a healthy labour market and steady consumer spending, although core inflation remained elevated amid higher oil prices, making the Federal Reserve’s job difficult. The Eurozone experienced subdued growth, with weak industrial output and cautious consumer demand, even as headline inflation edged lower, although still higher than European Central Bank’s 2% targe. The United Kingdom saw accelerated economic activity with higher-than-expected growth while inflation remained above target, constraining the Bank of England’s flexibility to cut rates. In Japan, inflation softened although policy rate remained high at 1%, while economic expansion remained moderate. Meanwhile, China showed strong economic growth supported by Govt stimulus measures offset by weak property markets and subdued consumer confidence. Inflation and policy rates remained steady. Overall, Q2 highlighted divergent macroeconomic paths, with policymakers balancing growth support against lingering macro pressures.
Looking at the performance, global risk assets delivered strong positive returns driven by resilient corporate earnings and positive developments in AI theme, however, commodities and gold performed poorly in the quarter amid geopolitical fears softened resulting from Middle East peace talks. US equity markets recorded significant gains as S&P 500 surged by 14.4% whereas DJ Islamic Markets Index booked 16.70% returns during the month. While in Europe, UK FTSE 100 and EU Euronext 100 delivered positive 2.15% and 8.7%, respectively. In Asia, Japan’s Nikkei 225 surged by 30.4% while China’s Shanghai index rose 3.7%. DJ Sukuk Index delivered positive 1.9% amid softening yields whereas US dollar strengthened, which appreciated 0.39% against UK pound. In commodities, DJ Commodity index tumbled by 8.5% driven by nearly 27% drop in Crude oil and 16.3% decline in gold prices amid easing geopolitical risks in the Middle East.
The following snapshot provides a comprehensive breakdown of the performance of different asset classes in Q2 2026, as well as their progress year-to-date.
Performance of global assets – Q2 2026
Portfolio Commentary
During the second quarter, all investment portfolios performed positively as markets rallied. Progressive Growth portfolio appreciated the most, with a 14.7% rise in value during the period. The drop in gold prices during the quarter was a drag on the performance for all portfolios, however, despite the pullback and short term weakness ahead, our long-term bullish view on gold remains intact.
Performance of Simply Ethical Online Portfolios in Q2 (01 April 2026 – 30 June 2026)
Year to date 2026 performance of Simply Ethical Online Portfolios (01 January 2026 – 30 June 2026)
During the quarter, there were several changes made to the investment allocation for all portfolios. Broadly speaking, we reduced our allocation to equities in favour of sukuks and precious metals as we continue to maintain a cautious view on equity investments, given current market valuations particularly for some US big techs remain vulnerable along with macroeconomic concerns including higher inflation, higher interest rates, policy uncertainties and geopolitical risks amongst other factors pose a possible downside risk to the markets.
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This article is for information only. Please do not act based on anything you might read in this article. Past performance is not a reliable indicator of current or future returns. This article contains general information only and does not consider individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to market such an offer or solicitation.
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