Where to invest in Q3 2026
There are significant unknowns going into the second half of the year, which could have a substantial impact on portfolios. Experts are advocating balance alongside optimism.
The halfway point of 2026 is approaching. The first six months have been a rollercoaster, and you may be wondering where to invest your money as we enter Q3.
So far we’ve seen the FTSE 100 and the S&P 500 both hit all-time highs, the largest initial public offering (IPO) in history, and a war in the Middle East that has threatened to send global inflation – and interest rates – skyrocketing.
The resolution of this conflict looks like the key variable going into Q3.
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“We… regard at least a partial reopening of the Strait of Hormuz, as indicated by the recent US-Iran agreement, as essential for continued equity market gains,” said Nannette Hechler-Fayd’herbe, EMEA chief investment officer at private bank Lombard Odier.
Should the Strait close again, the resultant increase to inflation expectations could force the Federal Reserve (Fed) to raise US interest rates. That would have negative implications for global markets.
Even if the Strait remains open, there could be further market fallout from the disruption that has already occurred.
“Markets have priced in a lot of the relief from the reopening of the Strait of Hormuz,” Rob Morgan, chief investment analyst at wealth manager Charles Stanley, told MoneyWeek. “They probably haven’t necessarily priced in the complexity of what happens over the next few months and beyond in terms of supply chain disruptions. We’ve had quite a pullback in the oil price, which has surprised a lot of a lot of people and led to a potential suppression of the inflationary impact, but there's still going to be a restocking cycle.”
Morgan also thinks that the tech sector will be front and centre in investors’ minds through the second half of 2026.
“Most people are going to be exposed to a huge amount of tech in their portfolio, whether that’s through a global tracker or a US tracker,” said Morgan.
The outlook for stocks in Q3
Several experts expect the artificial intelligence (AI) theme to keep driving the stock market higher, particularly in the US, during the second half of the year.
“US tech behemoths are continuing to pour billions into AI development,” said Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International. “That immense capex spend is bolstering companies across the value chain, including the industrial enablers that support the building of datacentres and rising energy needs.”
While the US is the headline story once again, other markets have potential.
For example, UK stocks still look undervalued.
Meanwhile, Patrick Brenner, chief investment officer, multi-asset at asset manager Schroders, is positive on UK stocks because they stand to benefit from higher commodity prices: “Their exposure to energy, materials and financials… provide diversification away from the narrow US technology-led rally.”
Emerging markets can also offer tech exposure without the premium valuations that US stocks trade at. Brenner is particularly positive about valuations for Chinese AI stocks as well as the momentum behind Taiwanese tech markets, though he cautions that his approach is “becoming more selective following strong performance in Korea" (a market that has been particularly volatile in recent months).
Could tech IPOs shake up the stock market?
SpaceX’s IPO was warmly received by investors initially, and it could be followed in the second half of 2026 by similar blockbuster debuts from frontier AI model developers Anthropic and OpenAI.
Morgan believes that these could be watershed moments for the AI trade more broadly, given that the disclosures both companies will make ahead of listing will effectively be investors’ first look inside the black box of AI model developers.
“It could have a knock-on effect on sentiment,” said Morgan. “These companies are going to be outlining their growth plans very prescriptively. That will give people a lot more information about the extent of the cycle and how those companies see it.
“What those companies do and say is crucially important, but up to now we haven't had a huge amount of insight into what they’re seeing, thinking, doing, planning for, beyond borrowing and raising a huge amount of money,” Morgan added.
It’s impossible to predict how this visibility could impact the market, but much of the world’s wealth, particularly in US equities, is currently invested in companies that are expected to be long-term beneficiaries of the AI trade.
The concentration in tech means there is a risk of a big market swing should sentiment fall.
The potential rewards, though, are large – so Morgan believes “it’s all about balance”.
“I wouldn’t advocate leaving [tech] behind or being completely on the other side of the boat,” he said. “It’s about having one foot in that camp and one in the other – which is more value and income-oriented traditional portfolios.”
Safe haven investments for the second half of 2026
All that considered, it’s clearly a good moment to think about your defensive investments in case the tech rally falters.
Fidelity’s Ahmed recommends rethinking your approach to safe haven investments given how the year has played out so far.
“Heightened geopolitical and fragmentation risks are putting a strain on traditional safe havens, which means investors can’t rely on a single asset to support riskier elements of their portfolio,” he said.
Gold is a good example of how individual safe havens can respond negatively to turbulent times. Despite traditionally being viewed as protection against geopolitical turmoil, the gold price fell following the outbreak of the conflict in Iran, prompting questions as to whether gold is still an effective hedge against inflation.
“Gold has performed surprisingly poorly through the conflict but we remain positive on the commodity, owing to its supportive underlying drivers,” said Ahmed. “It can perform strongly when inflation hurts bonds and serves as a diversifier when correlations between bonds and equities increase.”
Bonds are a more complex proposition. Schroders’s Brenner is broadly cautious about government bonds, though warns that concerns over the inflation risk and the Federal Reserve’s credibility diminish the appeal of US Treasuries. Conversely, he is positive about European (particularly Italian) government bonds.
Why you might want diverse commodity exposure
Given the complex setup for traditional safe havens – gold in particular – a diversified approach to commodities could be worth considering.
“I wouldn’t be singling out any one commodity,” said Charles Stanley’s Morgan. “I think you need a basket, because there’s lots of cycles within each individual commodity… if you took a basket approach, that would work quite well.”
One simple approach to achieving this would be to use a fund like the L&G Multi-Strategy Enhanced Commodities UCITS ETF (SW:ECCH) which invests in various commodities including oil, soft commodities, precious and industrial metals.
“Rather than pick a commodity and a particular holding period, that's a good diversified way to get some direct commodity exposure into your portfolio, without taking too much commodity-specific risk,” said Morgan.
