The first half of 2026 had no shortage of factors that drove markets down and then back up again. We witnessed increased volatility from the war in Iran, oil prices pushing inflation to multi-year highs (and then back down), and a new Fed chair taking the helm. Now in August, markets have had new concerns to digest, from AI investment questions, rising treasury yields, renewed oil price volatility, and a more fragmented Fed. Many of these are longer-term themes that could keep driving volatility in the months ahead. Yet these same trends have also propelled markets this year, which underscores how much diversification still matters within portfolios.

The world economy is still growing, but the easy disinflation phase has been interrupted. In the U.S., that likely means “higher for longer” policy patience. In Europe, it means slower growth with greater energy sensitivity. In Asia ex-China, it means better trend growth but more vulnerability to oil and shipping shocks. In China, it means steady growth and policy flexibility, but not a clean breakout. For markets, diplomacy now matters almost as much as data: any durable de-escalation around Iran and any clearer trade agreements would improve the outlook faster than most economic models currently assume.