Market Note
An impressive risk-on rally in Q2!
Geopolitical flare ups are mixing with sector driven rotations and seasonality factors. The first half of July is typically one of the strongest periods of risk-on activity due to half-year capital flows and a quiet corporate backdrop before earnings season kicks off.
Chart Source(s): JP Morgan
The wide spreads between winning and losing areas of the market was encapsulated in the Equity Long/Short hedge fund stylistic leaderboard where managers targeting growth and AI opportunities far outperformed those focused on old economy value non AI situations.
Macro managers started the quarter capturing market normalizations in April but returns dissipated for some due to a shrinking DM FX and FI opportunity set while leaders for the quarter harnessed returns from EM macro and targeted AI exposures.
Quant equity strategies continued to experience adversity, driven by indiscriminate sentiment driven flows and sector/factor rotations.
Commodity managers focused on capital preservation. They were shocked by the immediate disconnect between price action and fundamentals in oil markets with global inventory levels running low and war-related dislocations remaining elevated across energy and metals supply chains.
Global Markets & Economic Data
- US: June FOMC minutes were hawkish. Existing Home Sales data fell m/m and remains at a low level.
- Switzerland/Europe: The Swiss employment rate ticked lower to 2.9%. German May factory orders recovered after April’s plummet.
- Japan/China: Japanese consumer spending has contracted every month this year driven by a fall in real wage growth. Chinese inflation was below forecast at 1% y/y.
Index Returns Summary
| Asset Class | MTD | YTD |
|---|---|---|
| MSCI World | -0.72% | 9.99% |
| MSCI Asia Pacific | -1.15% | 13.23% |
| MSCI Europe | 0.94% | 8.24% |
| MSCI China | -7.09% | -15.54% |
| Bloomberg Barclays Global Aggregate Index | -0.71% | -0.19% |
| Bloomberg Commodities Index | -8.83% | 14.44% |
| HFRX Global | 0.63% | 4.77% |
| HFRX Macro/CTA | -0.88% | 5.77% |
| HFRX Equity Hedge | 1.70% | 8.55% |
*Index data as of June 30, 2026
Disclaimer: This material has been prepared by MASTERPIECE ADVISORS for informational purposes only and should not be construed as financial advice. Investments in hedge funds are speculative and involve a high degree of risk. This material is confidential and may not be disclosed without the express written approval of MASTERPIECE ADVISORS.