The initial spark came from Donald Trump on April 1, when he announced that the US had achieved almost all its objectives in Iran and that the operation would soon come to an end. Equity markets surged, and after a ceasefire was announced on April 8, the oil price fell from an intraquarter high of USD 113 to below USD 80. The rebound was so powerful that the S&P 500 had already erased all losses suffered during the Iran conflict by April 15 and climbed to a new record high. The US benchmark index closed the quarter up 16.3 %.
The rally was carried almost exclusively by the IT sector (+34.9 %) and by companies involved in building out AI infrastructure. This acceleration further intensified the historically high valuations and extreme market concentration: on average across eight common valuation metrics, the US market is now trading at its highest level since 1900, according to Bloomberg. The top ten stocks in the S&P 500 today account for around 41 % of the index (dot-com high: 26.6 %) and contribute almost half of the index's risk. Anyone buying a broad US index is effectively making a concentrated bet on a handful of very large tech and AI stocks – a boost to returns in the upswing, but vulnerable to sector-specific setbacks. The IPO of SpaceX on June 12 was emblematic of the market mood: with a valuation of around USD 1.77 trillion, it was by far the largest IPO in history. Despite an astronomical valuation of roughly 90 times annual revenue, the shares were heavily oversubscribed and rose a further 20 % on their first day of trading. Elon Musk thereby be-came the first person in history worth a trillion dollars, and thousands of SpaceX employees became million-aires.
The MSCI World gained 14.8 % over the quarter, driven by strong US results and the index's enormous US weighting of over 72 %. Cyclical sectors gained 17.9 % globally, while defensives were practically un-changed at +1.1 %. The Japanese market was also caught up in AI fever (Nikkei 225 +35.5 %), and now has a new index heavyweight in memory chipmaker Kioxia Holdings (+363.7 %), a name that was barely known just a few months ago and was only added to the benchmark index in April.
Europe also benefited (MSCI Europe +12.0 %), with the Swiss SPI among the winners at +12.2 %. While the rally was more broadly based in Europe than in the US, owing to Europe's greater dependence on oil from the Middle East, semiconductor industry suppliers also benefited strongly here from the AI boom. In the second quarter, for instance, ASML (Netherlands) rose 53.9 %, Infineon (Germany) 114.6 %, STMicroelec-tronics (France) 125.3 % and Nokia (Finland) 70.5 % – to name just a few examples. In the Swiss market, Centiel (+141.1 %), Ams OSRAM (+112.3 %) and Inficon (+86.0 %) were the clear AI winners.
The AI boom was especially pronounced in emerging markets excluding China: the MSCI Emerging Mar-kets ex China rose 35.04 % – its strongest quarterly performance in over 20 years. This was driven above all by the markets in Taiwan (TWSE +48.3 %) and South Korea (KOSPI +65.9 %), which now each carry significantly more weight in the MSCI Emerging Markets index than China and India. This index, too, has become heavily IT-weighted: the sector now accounts for around 43.84 %, with TSMC, Samsung Electron-ics and SK Hynix alone contributing nearly 30 %. A passive investment in the popular emerging markets index has thus effectively become a bet on the Asian side of the AI rally.
At the end of the second quarter, global equity markets are therefore mostly at new record levels, but valu-ation levels and market concentration have also risen to historic highs. The second half of the year will show whether this dizzying momentum continues and whether the high valuations are justified. In the past, tech-nology rallies have repeatedly been followed by market corrections, from which defensive, lower-risk sectors and companies emerged as winners. Given the overweight to such companies within our risk-based equity strategies, we should benefit disproportionately from any renewed rotation. Both the first quarter of 2025 and that of 2026 showed how quickly a rotation out of IT stocks into safer names can occur once the AI narrative comes under pressure. With the recent share price surges, the risk of a setback has in any case increased markedly again.
