Market commentary: Jun 2026

Investment performance

Share markets have driven returns over the year to 30 June with international shares and infrastructure performing particularly well. Prices are elevated - but not overly - and market psychology remains optimistic although less so. Looking ahead, what’s the outlook?

Share market outlook – risks and opportunities

Markets surging to record highs, unconstrained development of artificial intelligence, wars in the Middle East and Ukraine, soaring energy prices and elevated inflation. The news headlines provide plenty for us to worry about!

Despite this why have share markets shown such strength? I looked into this and found some interesting thoughts from Capital Group in their quarterly outlook. Here’s the summary…

It largely comes down to the simple fact that US companies are earning huge profits. Artificial intelligence is a big part of this, but other sectors are also strong. Banks are capitalising on higher interest rates, innovative therapies are driving strong growth in healthcare, and higher oil prices are pumping up energy companies.

Here are three share market themes that Capital Group are focussing on:

The AI freight train
In the race for AI supremacy, five hyperscalers – Amazon, Alphabet, Meta, Microsoft, and Oracle have committed to investing a staggering US$650 billion this year on data centres. This translates into soaring prices, especially for advanced semiconductor makers like NVIDIA and Broadcom, Taiwan Semiconductor Manufacturing Company (TSMC), and networking companies like Cisco Systems.

It’s not just the US tech giants though
Many global leaders in AI can be found outside the US. They call them the “Emergent seven”: TSMC (Taiwan), Samsung Electronics (South Korea), SK Hynix (South Korea), Media Tek (Taiwan), Delta Electronics (Taiwan), Tencent (China), Alibaba (China).

These seven companies are attractive investments as they have lower valuations and are generating earnings growth expectations beyond those for the US market.

Opportunities in the physical economy
So called “pick and shovel” companies in both the semiconductor supply chain and infrastructure development are seen as the clearest opportunity. Demand for steel, copper, heavy construction services, and power generation equipment is soaring in support of the data centre build-out.

Companies that are unlikely to be disrupted by AI are also attractive. Cruise ships are not likely to be replaced by AI, jet engine manufacturers will benefit from rising demand for travel and greater defence spending.

The bottom line for investors
To be sure, investors are confronted with risks heading into the second half of the year, but every year offers its own unique mix of risks and opportunities. A good reminder that maintaining well diversified portfolios is important in any market.

Richard Grimes, CERTIFIED FINANCIAL PLANNER (CFP^CM), Director and Financial Adviser