Wall Street is "remarkably unanimous in its optimism" about the second half of the year: confident that the market will "overcome everything."

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After a first half marked by geopolitical conflicts, drastic oil price swings, and major fluctuations in interest rate expectations, Wall Street is greeting the second half of 2026 with a rare consensus of optimism—the mainstream view is that the market has proven its resilience and will continue to climb.

A diversified portfolio of US stocks, bonds, and commodities just recorded the strongest first-half returns since 2021. Semiconductor stocks rose by triple digits, the Nasdaq 100 index climbed nearly 20%, and US Treasury bonds also delivered positive returns. In nearly all major institutions’ mid-year outlooks, Wall Street is betting that the market can coexist with higher valuations, higher borrowing costs, and the ongoing, reshaping wave of artificial intelligence.

However, much of the good news may already be priced in. According to strategist forecasts compiled by Bloomberg, the average year-end target for the S&P 500 index is 7,716 points, which implies only around 3% upside from its June 30 closing level; the index has already gained about 9% this year. The focus of debate is not about the direction, but whether market leadership can broaden from core AI trades to a wider range of sectors.

First Half: Resilience Beyond Expectations

Market performance in the first half exceeded most people’s expectations even amid multiple shocks.

Stephen Dover and Larry Hatheway of Franklin Templeton Institute wrote: "The global economy and financial markets outperformed the expectations of many people; the central theme of the outlook condenses to one word: resilience."

However, the winners in the first half were quite unexpected. The “Magnificent Seven” group that defined the market over the past two years saw total returns fall by about 2%, even trailing UK gilts, as investors shifted funds from AI-deploying tech giants to companies building AI infrastructure. Despite months of geopolitical turmoil, gold, silver and Bitcoin all ended the first half lower.

Barclays pointed out that the rally has been much more concentrated than the overall index would suggest—semiconductors and computer hardware companies contributed about 87% of the S&P 500’s first-half gains.

AI Trade Expands: From Tech Giants to the Real Economy

Heading into the second half, the core narrative on Wall Street is quietly shifting: the beneficiaries of the AI trade are spreading from mega-cap tech companies to the real economy.

Institutions such as BlackRock and Invesco believe AI investment is rapidly infiltrating fields like semiconductors, storage, power grids, data centers, and industrial infrastructure. A team led by Jean Boivin at the BlackRock Investment Institute wrote: "We prefer to seek returns in short-term bonds, especially eurozone sovereign bonds, rather than relying on longer-duration, more rate-sensitive bonds. We remain overweight US equities, focusing on bottleneck opportunities within AI growth."

JPMorgan expects inventories to rebound and corporate confidence to improve, with AI spending expanding beyond just the mega-cap tech space.

Raphael Thuin, head of capital markets strategy at Tikehau Capital in Paris, said: "Record earnings growth and AI-driven enthusiasm have pushed risk assets to new highs. However, the second half is unlikely to simply repeat the first half. Some areas of the 'picks and shovels' AI trade have already been overstretched, and any change in the narrative around computing power demand could quickly reshape market leadership."

Risks Persist: Inflation, Policy, and Geopolitics

Despite the optimistic consensus, risks have not disappeared—the differences lie more in degree than direction.

At the start of the new quarter, the market received a reminder: US non-farm payrolls data for June showed a marked slowdown in hiring, but the unemployment rate fell due to a lower labor participation rate, prompting traders to lower their expectations for a Fed rate hike.

JPMorgan warns that if economic resilience continues, inflation may remain sticky, forcing central banks to further tighten policy. Barclays strategist Alexander Altmann wrote: "I firmly believe that the second half of 2026 will be just as full of uncertainty as the first half—the past six months have already seen three major geopolitical conflicts, the second-largest semiconductor rally in history, and the sixth-largest software sell-off on record."

Marvin Loh, senior macro strategist at State Street Bank in Boston, noted: "AI has proven to be a stabilizing force for a world facing both geopolitical and monetary policy uncertainty. But while AI construction seems to enjoy unlimited liquidity, the reality is different—capital availability and costs will be put to the test in the second half."

A unifying thread in nearly all outlooks is that the economic expansion is still continuing. The bigger debate isn’t whether the story of the first half will persist, but whether market leadership can truly spread beyond AI trades themselves, or if the next group of winners will merely be another batch of AI beneficiaries.

Risk Warning and DisclaimerMarkets are risky, and investments must be made cautiously. This article does not constitute personal investment advice and does not consider any individual user's specific investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular situation. Investing based on this article is at your own risk. ```