The first half of the year was marked by uncertainty in the capital markets. Geopolitical tensions, the war in Iran, trade conflicts, tariff debates, and political risks repeatedly caused market jitters. At the same time, many markets performed remarkably well. This discrepancy between the perceived negative news environment and market performance was one of the defining characteristics of the first half of the year.
For investors, this leads to an important insight: Markets do not react the same way to every headline. What matters is whether an event changes economic fundamentals – that is, growth, corporate earnings, inflation, interest rates, or liquidity. As long as these factors remain intact, stock markets can remain resilient even in a challenging environment.
The Most Important Points at a Glance
🔎 Resilient markets despite global uncertainty: Many stock markets held up well in the first half of the year, even though the geopolitical news landscape remained tense.
🔎 Headlines aren’t automatically market drivers: What matters most for capital markets is whether events affect corporate earnings, growth, inflation, or interest rates.
🔎 Artificial intelligence remains a key topic: AI is driving expectations, investments, and profit potential – not only among large technology companies, but increasingly across the entire value chain.
🔎 IPOs need to be absorbed: Larger IPOs are likely to follow in the near future. The market needs to “digest” these volumes, which ties up capital in the short term.
🔎 Balance remains key: The current environment calls for neither a fully offensive nor a fully defensive approach. Broad diversification remains essential.
Markets Are Focusing on Fundamentals
The first half of the year has once again shown that there is a difference between what is politically or socially significant and what has a lasting impact on capital markets. Geopolitical events can attract attention and trigger short-term volatility. In the long term, however, what matters most is whether they affect corporate profits, investment, consumption, inflation, or financing costs.
This explains why the markets remained resilient despite numerous negative headlines. The global economy proved resilient, many companies posted solid results, and expectations of a less restrictive monetary policy provided support. The fundamental outlook was thus better than the news would suggest.
Please note: investing in securities involves risks as well as opportunities.
This distinction is crucial for investors. Anyone who automatically interprets every political escalation as an investment signal runs the risk of confusing short-term uncertainty with long-term market relevance. It is not a matter of ignoring risks, but of placing them in the proper economic context.
A World Order in Transition
Geopolitical uncertainty is likely to remain a defining issue in the coming years. The global order is changing. The US is gradually stepping back from its former role as the clearly dominant hegemonic power, while other centers of power are gaining in importance. Whether this will result in a bipolar world between the US and China, a system of competing blocs, or a multipolar order remains to be seen.
The role the U.S. will play in global politics in the future is uncertain. This is increasing uncertainty in the markets. (c) unsplash
For capital markets, this means a structurally higher level of uncertainty. Trade conflicts, tariff debates, geopolitical tensions, and regional shifts in power will become a more frequent part of the market landscape. Nevertheless, not every geopolitical development automatically changes the direction of the markets. Such developments become particularly relevant when they disrupt supply chains, significantly affect energy prices, generate inflationary pressure, or weigh on corporate profits.
Artificial Intelligence as a Driver of Growth
Artificial intelligence was once again a key factor supporting the markets. AI remains one of the major structural growth drivers and shapes expectations regarding productivity, investment, and corporate profits.
This is no longer just about individual large technology companies. The scope of the issue is broader: semiconductors, data centers, energy infrastructure, software, data processing, and companies that use AI to boost efficiency can all benefit. At the same time, these high expectations must increasingly translate into concrete revenue, margins, and profits.
AI was also seen as a strong growth driver in the first half of the year. In the second half of the year, it will be crucial to see whether corporate earnings can keep pace with market expectations. (c) unsplash
In the second half of the year, it will therefore be important to see whether corporate earnings can keep pace with market expectations. The bar remains high, especially in segments where valuations already reflect a great deal of optimism.
Major IPOs Expected in the Tech Sector
There is likely to be further momentum in initial public offerings. This is supported by the strong market performance of recent months, higher valuations, improved financing conditions, and a more constructive capital market environment.
Larger initial public offerings could attract attention, particularly in the technology and AI sectors. Such IPOs would not only represent new investment opportunities but also serve as a test of the market’s risk appetite. They would show whether investors are willing to accept high valuations in exchange for long-term growth prospects.
At the same time, the market must absorb additional issuance volume. Periods of high IPO activity can tie up capital in the short term and dampen market momentum. However, successful IPOs can also broaden the market.
Second Half of the Year: Constructive, but Not Risk-Free
The outlook for the second half of the year is generally positive. The global economy continues to grow, many companies are in a solid position, and risky assets remain relevant in this environment. At the same time, inflation, interest rates, political uncertainty, and geopolitical tensions remain key factors.
Earnings trends play a key role. As long as companies can grow and maintain their margins, the foundation for the stock markets remains intact. If expectations are not met, highly valued market segments in particular could become more vulnerable to setbacks.
Monetary policy also remains a key factor. The markets are anticipating a less restrictive stance from central banks. Whether these expectations are met depends largely on inflation and economic data. Interest rate cuts can have a supportive effect, but they are not positive per se if they are made out of concern for a significant slowdown in growth.
Added to this is the political dimension, particularly in the US Trade and tariff policies, domestic political developments, and the U.S.’s future role in the global economy could once again cause some volatility. In addition, the important U.S. midterm elections are coming up in November.
A broad range of options rather than extreme positions
At midyear, there is little to suggest that the portfolio should be positioned toward extremes. There are good reasons to remain invested in stocks and other risky assets. At the same time, given the uncertainties, it would not make sense to focus exclusively on an aggressive strategy. Nor does the current environment call for a completely defensive stance.
A portfolio that can weather various scenarios is crucial. Equities remain important as long as growth and earnings stay stable. After years of low yields, bonds are once again playing a more significant role in the portfolio and can help stabilize it. From a regional perspective, there are many arguments in favor of broad diversification: The U.S. remains significant due to its leading technology companies, Europe offers more attractive valuations in many sectors, and emerging markets can present selective opportunities.
Diversification is also important within the field of AI. The trend is not limited to just a few large U.S. corporations. Along the global value chain, there are companies in various regions and industries that stand to benefit.
Please note: investing in securities involves risks as well as opportunities.
Conclusion: The economic impact is the key factor
The first half of the year showed that markets can remain resilient even amid challenging news. The key factor was that the fundamental situation remained stronger than the headlines suggested. Corporate earnings, growth, expectations of falling interest rates, and structural themes such as artificial intelligence provided support.
The environment will remain challenging in the second half of the year, but not unattractive. Investors should take risks seriously without letting every headline sway them. What matters is whether political or geopolitical uncertainty actually leads to economic headwinds.
The key message, therefore, is: stay invested, diversify broadly, and keep an eye on the fundamentals. Not every headline is an investment signal. What matters is what it means for growth, inflation, interest rates, and corporate earnings.
Legal disclaimer
This document is an advertisement. Unless indicated otherwise, source: Erste Asset Management GmbH. The language of communication of the sales offices is German and the languages of communication of the Management Company also include English.
The prospectus for UCITS funds (including any amendments) is prepared and published in accordance with the provisions of the InvFG 2011 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in conjunction with the InvFG 2011.
The currently valid versions of the prospectus, the Information for Investors pursuant to § 21 AIFMG, and the key information document can be found on the website www.erste-am.com under “Mandatory publications” and can be obtained free of charge by interested investors at the offices of the Management Company and at the offices of the depositary bank. The exact date of the most recent publication of the prospectus, the languages in which the fund prospectus or the Information for Investors pursuant to Art 21 AIFMG and the key information document are available, and any other locations where the documents can be obtained are indicated on the website www.erste-am.com. A summary of the investor rights is available in German and English on the website www.erste-am.com/investor-rights and can also be obtained from the Management Company.
The Management Company can decide to suspend the provisions it has taken for the sale of unit certificates in other countries in accordance with the regulatory requirements.
Note: You are about to purchase a product that may be difficult to understand. We recommend that you read the indicated fund documents before making an investment decision. In addition to the locations listed above, you can obtain these documents free of charge at the offices of the referring Sparkassen bank and the offices of Erste Bank der oesterreichischen Sparkassen AG. You can also access these documents electronically at www.erste-am.com.
Our analyses and conclusions are general in nature and do not take into account the individual characteristics of our investors in terms of earnings, taxation, experience and knowledge, investment objective, financial position, capacity for loss, and risk tolerance. Past performance is not a reliable indicator of the future performance of a fund.
Please note: Investments in securities entail risks in addition to the opportunities presented here. The value of units and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your units. Persons who are interested in purchasing units in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision. If the fund currency is different than the investor’s home currency, changes in the relevant exchange rate can positively or negatively influence the value of the investment and the amount of the costs associated with the fund in the home currency.
We are not permitted to directly or indirectly offer, sell, transfer, or deliver this financial product to natural or legal persons whose place of residence or domicile is located in a country where this is legally prohibited. In this case, we may not provide any product information, either.
Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to § 21 AIFMG for restrictions on the sale of the fund to American or Russian citizens.
It is expressly noted that this communication does not provide any investment recommendations, but only expresses our current market assessment. Thus, this communication is not a substitute for investment advice.
This document does not represent a sales activity of the Management Company and therefore may not be construed as an offer for the purchase or sale of financial or investment instruments.
Erste Asset Management GmbH is affiliated with the Erste Bank and austrian Sparkassen banks.
Please also read the “Information about us and our securities services” published by your bank.
More on the topic
Best of Charts: The road (in)to the White House
Three weeks before election day, the race for the White House is wide open: While Kamala Harris is ahead in the nationwide polls, Donald Trump is currently likely to be ahead in the crucial “swing states”. In any case, the economic situation and mood in the USA are likely to play an important role in the race for the presidency.