AI Narrative
SaaS stocks have been beaten down by the AI narrative for the first half of 2026. The worst performers in the 2026 SaaS sector, notably Atlassian (-57.9%), HubSpot (-40.7%), and ServiceNow (-40.0%), are primarily victims of the "AI Bazzoka," a valuation restructuring driven by the fear that AI agents will obsolete traditional "per-seat" pricing. Investors are aggressively punishing companies whose revenue is tied to human headcount, favoring instead "infrastructure" players or those successfully pivoting to consumption-based models. Four major hyperscalers Amazon, Microsoft, Alphabet, and Metahave escalated their annual capital expenditure to a staggering combined projection of more than$700 billion, an 80% increase from the previous year that reflects a historic race for AI infrastructure. This massive surge, which includes Amazon's industry-leading $200 billion commitment, is being driven not only by the race to secure specialized GPUs and custom accelerators but also by severe inflation in the hardware supply chain, where rising memory chip costs alone are adding tens of billions to corporate budgets. As a result, these historically cash-rich giants are seeing their aggregate free cash flow drop to decade-long lows, forcing a pivot toward external financing.
The Consumer
In May 2026, U.S. consumer sentiment plummeted to a historic all-time low of 48.2, marking the first time the University of Michigan's index has dropped below the 50-point threshold since tracking began in 1952. This deep-seated pessimism is primarily fueled by a sharp 9% drop in current economic conditions, as Americans feel "buffeted" by soaring gasoline prices averaging $4.54 per gallon and persistent trade tariffs that have severely eroded real income expectations. While one-year inflation expectations moderated slightly to 4.5%, the reading remains significantly higher than pre-war levels seen in early February, leaving consumers increasingly anxious about their personal finances and the viability of major household purchases amid ongoing geopolitical instability in the Middle East.
The "New Guy"
Although a new Fed chair will be appointed, it should be borne in mind that Jerome will still attend Fed meetings; whether he will retain influence is up for grabs. Yet, Bloomberg data suggests that forecasted rate policy may recently have flipped. Geopolitical events and a surge in the prices of primary goods, such as oil and minerals, may be seen as the reason for this change in stance, maybe.
Sometimes it's about the Bling Bling …….
Amid Donald Trump's policy approach precious metals have seen a surge in scarcity, price and demand. The resurgence of "America First" trade policies under the second Trump administration has fundamentally reshaped the landscape for precious metals. CoT data have shown a net-long positioning in Gold and in Silver throughout the year 2026.
The Banks and Lending.
While the broader market remains buoyant, the specific "rising yields and inflation" environment of Q2 2026 has exposed significant cracks in the operational armor of both Barclays and Jefferies.
Barclays reported a pre-tax profit of £2.8 billion for Q1/Q2 2026, but the headlines were stolen by a massive surge in "sour loan" provisions. Barclays was forced to set aside a staggering £823 million for bad debts, a sharp increase from the previous year. A significant portion of this roughly £228 million stemmed from involving the collapse of the UK property lender Market Financial Solutions (MFS). Jefferies shares have plummeted roughly 35% year-to-date (as of May 2026). The market is punishing the firm for an 85-cent EPS miss against a 96-cent expectation. The First Brands Fallout: The bank took a significant hit tied to the bankruptcy of US auto-parts giant First Brands Group, which collapsed with over $10 billion in debt. While Jefferies management claims they have now "zeroed out" this exposure, the loss has shaken investor confidence in their risk management during the current credit squeeze.
Corporate credit
Since the beginning of 2026, the fixed income market has transitioned from an era of "rate-cut optimism" to a regime of persistent fiscal dominance and "sticky" inflation, fundamentally reshaping the yield landscape. While the year opened with expectations of a swift return to 2% inflation and multiple Fed cuts, a resurgence in energy prices driven by geopolitical instability and an oil supply shock has anchored the 10-year Treasury yield near 4.40% and forced a "bear normalization" of the yield curve. This macro backdrop, combined with a chronic shortage of AAA-rated issuance and surprisingly resilient corporate earnings,pushing the AAA-BBB spread to its tightest levels in 25 years.
On one side, the economy is still expanding. Manufacturing and services remain in growth mode, equity markets are hitting record highs, AI spending is exploding, and liquidity conditions are improving again as M2 money supply rises. Investors continue to believe that AI will generate a new productivity cycle, which is why capital is flooding into infrastructure, semiconductors, cloud platforms, energy, and commodities.
On the other side, inflation pressures are quietly rebuilding. Rising oil and commodity prices, massive AI infrastructure spending, supply-chain inflation, and persistent fiscal deficits are keeping yields elevated and reducing expectations for aggressive Fed rate cuts. Consumers are becoming weaker, credit stress is appearing in parts of the banking sector, and corporate defaults are beginning to rise beneath the surface.