Welcome to Macro Update! We are now seven months into 2026, so we should check in on our outlook from February 2026 and provide key updates.
The February Macro Trends note discussed several investment themes centered around a changing global economy. It included geopolitical fragmentation, shifting supply chains, artificial intelligence infrastructure, energy demand, and critical materials. Since then, major global events have reinforced many of the themes introduced, while others have yet to unfold. This July Macro Update will go through each original thesis and examine how time, among other things, has influenced them.
Geopolitics:
Roughly two weeks after our February note was published, the geopolitical situation got more complicated. After Israel and the United States launched a joint attack on Iran, the Strait of Hormuz closed. The transport of roughly 20 million barrels of oil per day came to a halt (3). This disruption has had consequences across multiple markets. The price of Brent crude, distillates, helium, urea, and many other products downstream of oil production spiked. This energy shock has shifted inflation expectations and reaction functions around the world. Emerging markets have been hit particularly hard, and the resulting energy inflation has sparked what looks like a rate hiking cycle by central banks around the world. In addition to the supply shock, the successful closure of the Strait of Hormuz by a clearly outgunned Iranian military has shifted perceptions of American military power. This brought cheap asymmetric military tactics and weapons, such as drones and mines, to the forefront of everyone's thinking. First Ukraine and now Iran are giving the world an education in asymmetric warfare, they are resistant to an opponent with a much stronger conventional military.
Another example of how this conflict impacted our world is the increasing number of European government contracts with European defense companies. Governments around the world are focused on securing specific industries and reducing dependence on other countries. For example, China is restricting export of critical minerals to places like Japan. They used this foreign policy tool in reaction to unwelcome comments from the Japanese prime minister. Other countries, in response to China’s actions, have ramped up mineral mining, processing, and refining domestically. The United Kingdom announced a £50 million investment to increase domestic critical mineral production (5). The U.S. Department of Energy is making moves to improve manufacturing efficiency, diversify supplies, and develop alternatives to critical minerals (6).
Ex-US Markets:
Emerging markets (EEM) are up about 16% YTD and still lead the S&P 500, so our headline thesis remains intact. But two supporting claims in the June review are contradicted by the price data:
• Cap-weight S&P is not down. Cap-weight is where the largest companies are weighted the heaviest in a portfolio or index. SPY closed up roughly 9.5% YTD on June 30, and finished July 17 at 743.29, up about 9.0% YTD. Equal weight (RSP), where all companies weigh the same in an index or portfolio, is up about 10.9%. The real dispersion is not cap-weight-versus-equal-weight; it is the Mag 7 lagging almost everything else (up only ~1.5% YTD). US equity is up, not down.
• The dollar strengthened. Emerging markets have outperformed YTD despite a stronger dollar, which is a more fragile setup than the note implied.
• Momentum has also rolled over: EEM, an emerging markets ETF, fell roughly 11% in the last month as the dollar held firm. EWZ, the single-country (Brazil) illustration, is up about 12% YTD (near $35.50) but remains around 15% below its high and lagged the broad EM index.
As the months have passed, the “sell America” narrative has faded. Much of that energy was driven by tariff uncertainty and new trade policy. Since then, the U.S. market has recovered from Liberation Day downturns, delivering record high returns to investors. While international markets continue to benefit from low valuations, the U.S. market remains the most dynamic market while delivering the steadiest returns for investors. The valuation gap between U.S. and ex-U.S. markets combined with the concentration of hyperscaler investment, remain a dynamic worth monitoring as time goes on (7).
Technology:
While the AI trade is still hot, analysts everywhere are trying to predict when the bubble will burst and who will prevail. At this stage of data center buildout, the most visible financial activity has been in the construction and contracting part, meaning the companies receiving capital from hyperscalers like Amazon, Microsoft, and Meta, to build data center infrastructure. AKA, picks and shovels.
As noted in our February update, the cybersecurity sector has been closely tied to the growth of the AI trade. In the last six months, NASDAQ Cybersecurity ETF (CIBR) has seen 16% growth. Which means the cybersecurity companies held in the ETF are staying strong in this period of volatility. However, that is not a definite statement of future success. This is just an index, which provides us with data from which we can make a more informed thesis (8).
Lastly, we mentioned monitoring quantum computing. Recently, we have seen this sector rally, meaning a rapid increase in price after a period of low growth or decline. This bullish trend could just be short term. Whether this momentum is sustained will depend on if companies find use cases for quantum technology.
Energy:
In the last few months, we have seen continued investment in commodities, specifically energy. This has been accelerated by global investment in artificial intelligence infrastructure, which requires an enormous amount of electricity increasing the need for copper, aluminum, uranium, steel, and other industrials. In early March, the U.S. Energy Department announced a $1.9 billion investment in updating the grid structure to reduce energy costs in the long run. A portion of the project includes replacing powerlines with high capacity conductors that allow for more efficient and lower cost energy (2).
As artificial intelligence buildout continues to expand, governments and private companies have accelerated investment into power. For example, as mentioned in the February note, large companies like NuScale Power, Oklo, Rolls-Royce, and Amazon are invested in SMR technology. Small Modular Reactor (SMR) technology refers to nuclear fission reactors that produce electricity. This form of clean energy is used for grid electricity and data centers. SMR technology relies heavily on critical minerals, like uranium. The growing demand for uranium and other critical minerals tied to SMR technology has drawn attention to non-US mining and refining capacity. Where there is more demand for cleaner more efficient energy, there tends to be more demand for critical minerals.
On another note, the traditional carbon-based energy sector has been shocked by the Strait of Hormuz closure. Recent geopolitical tensions in the Middle East and the temporary disruption of shipping through the Strait of Hormuz served as a reminder that global energy markets remain vulnerable to supply shocks. Carbon-based energy sources continue to play a central role in global energy, even as investment in renewables and nuclear accelerates. The world will have to adjust to increased demand for critical minerals, which will take a very long time for infrastructure, the labor force, transport, and technology to fully adjust. While their use continues to expand, carbon-based energy sources have remained a critical component of the global energy mix.
Materials/Mining/Industrials:
As mentioned above, since February, the investment case for materials, mining, and industrial inputs has been reinforced because global demand for critical resources keeps accelerating alongside developments in artificial intelligence, electrification, and energy infrastructure. These technologies require significant amounts of copper, aluminum, steel, lithium, and rare earth elements to operate. This demand growth is putting pressure on existing mining, refining, and processing capacity worldwide (10).
Mentioned above, another area to look at is uranium, which is primarily used in nuclear energy. As nuclear gains more traction for being renewable and having little waste compared to other energy sources, uranium seemly continues to be a hot commodity. Literally. Canada, the U.S., and Kazakhstan are expanding uranium production to support the global nuclear energy need (10). In this environment, demand across the materials and mining sector continues to broaden. In the U.S. alone, uranium production increased by 214% from 2024 to 2025 (11). Uranium seems to be joining critical minerals like lithium and rare earths as a resource gaining attention.
Conclusion:
To put a nice bow on our analysis of the current state of the world, these major categories from our February note are not isolated trends. They are interconnected ideas and events that depend on one another to fully play out. The closing of the Strait of Hormuz, an example of geopolitical fragmentation, slows trade impacting AI buildout, while also pushing governments and private companies towards cleaner less carbon-based energy sources, and that transition increases demand for critical minerals. This fragmentation is accelerating the race for critical minerals, which impacts trade flows and data center buildout. Cybersecurity and quantum computing are also caught in the middle of technological advancement and national security, two ideas that are difficult to separate. What connects all these ideas is: we live in a complicated and constantly changing world that needs more resources to power new technology and advancement, at a time when countries are less willing to work together to secure them. The developments of the past six months have done little to slow any of these dynamics, and much to accelerate them.
Report Card:
Theme | Verdict (7/17) | Key evidence as of July 17, 2026 |
Geopolitics / spheres of influence | On track (strengthened) | On June 17, US-Iran MOU reopened Hormuz, then unraveled mid-July: US resumed blockading Iranian ports, Iran struck US targets across the Gulf, and oil re-spiked. China formalized a rare-earth enforcement/reporting regime (MOFCOM No. 26, eff. July 1); IEA warned July 16 that full implementation puts ~$6.5T of Western industry at risk. Venezuela oil/minerals leverage intact. |
Commodities / industrial bull market | On track | Copper ~$6.34/lb, a three-week high near record levels, on Chilean supply hits (Antofagasta H1 -9.5%, storm outages); ~+9% YTD but off the January record. Aluminum elevated (~$2.53/lb), driving copper-to-aluminum substitution. |
Ex-US / EM outperformance | Needs revisiting | EM (EEM) +16% YTD still leads but fell ~11% in the last month. Two June claims fail cap-weight S&P is +9% YTD, and the dollar strengthened ~5% YTD, it did not weaken. EWZ +12% YTD but still ~15% off its high. |
Technology / AI returns | Too early (sub-bets reversed) | Core ROIC call is still unresolved. Mag 7 (MAGS) only +1.5% YTD, lagging the broad market badly, though it recovered ~4.5% over the month after the July 2 AI-infra selloff. Sub-bets flipped: quantum crashed (IONQ -24%, RGTI -36%, QBTS -36% YTD) and cybersecurity led (CIBR +28% YTD). |
Energy / AI power | Mixed | Physical thesis intact: uranium spot steady ~$85/lb; Oklo/Meta and Microsoft/Constellation deals progressing. But the equity leg broke: URA -10% YTD, down ~11% since June 30. Oil round-tripped (>$110 April to <$70 July 1) then rebounded to WTI ~$82 / Brent ~$89 on the re-escalation. |
Materials / mining | On track (equities gave back) | Rare-earth squeeze intensifying (enforcement, IEA warning). But the equity expressions corrected hard: MP -10% YTD (-24% in a month), USAR +28% YTD but -37% in a month. Same physical strength/equity-weak split as uranium. |
References:
1. https://www.bbc.com/news/articles/cx2dyz6p3weo
3. https://www.eia.gov/todayinenergy/detail.php?id=61002
4. https://www.csis.org/analysis/why-west-keeps-losing-critical-mineral-assets-china
6. https://www.energy.gov/cmei/ammto/critical-minerals-and-materials
7. https://www.apolloacademy.com/what-happened-to-sell-america/
8. https://finance.yahoo.com/quote/CIBR/
10. https://unctad.org/news/critical-minerals-are-reshaping-global-trade-demand-surges