VOLVER


Quarterly Letter

Second Quarter 2026

Quarterly letter

  • Second Quarter 2026

Download

Dear investor,

The first half of 2026 left us two very different versions of reality. The first quarter was defined by losses. Geopolitical tensions, spiking energy prices and the spectre of stagflation had a profound impact on numerous publicly traded assets. In the second quarter, the opposite was true. With the reopening of the Strait of Hormuz and negotiations between the US and Iran, crude oil prices walked back the previous gains, inflation expectations moderated, and the markets gradually returned to normal.

Stock markets have not been immune to the uncertainty. In the first quarter, there were widespread losses, resulting in setbacks of 4.5% for the S&P 500 and 1.5% for the STOXX EUROPE 600. The energy, materials and utilities sectors led the markets, while technology, consumer and financials were severely punished. In the second quarter, however, the trends were reversed: the S&P 500 climbed 14.9%, and the STOXX Europe 600 gained 10.1%, led by technology, consumer, and financial stocks, as energy, materials, and utilities declined. In just six months, the market pendulum swung from pessimism to optimism without breaking stride.

At this point, numerous investors are wondering which of the two versions is the right one. In our view, the answer is neither: we do not subscribe either to the fear of the first quarter or the euphoria of the second. As tends to be the case when markets experience such sharp fluctuations, the truth lies somewhere in between. The fact is that, day-to-day noise aside, the leading global indices have closed out the first half of the year with near-double-digit gains: 9.5% for the S&P 500 and 8.4% for the STOXX EUROPE 600. This was a positive performance, consistent with historical stock market trends that more accurately reflects reality than the noise surrounding this first part of the year.

The global economy has again shown great resilience and adaptation. Since the 2020 pandemic, it has endured multiple geopolitical conflicts, supply chain crises, inflationary shocks, and one of the sharpest interest rate increase cycles in decades. Nevertheless, it has managed to avoid a recession that markets had, at times, priced in as unavoidable. Productivity improvements driven by AI coupled with the financial strength of the private sector have sustained economic activity that, despite the ups and downs, has continued to grow. Contrary to the prevailing belief that a recession was imminent, the reality is that the economy is grounded on strong fundamentals.

Secondly, some doubts regarding the world’s largest economy are being dispelled. The appointment of Kevin Warsh as chairman of the Federal Reserve marked a shift towards more austere communication and a greater focus on inflation. Additionally, the Supreme Court’s ruling in “Trump v. Cook” underpinned the Fed’s independence by affording it specially protected legal status. Challenged by narratives that cast doubt on the US credibility, events have confirmed the legal certainty of its institutional framework.

Lastly, the global economy may find new sources of support in the next few quarters. Lower oil prices pave the way for contained inflation and a more accommodative monetary policy. In the US, the tax cuts and investment incentives approved in 2025 should continue to be noticeable. Meanwhile, Germany has just unveiled one of the most comprehensive reform packages in decades, comprising measures covering taxation, pensions, the labour market and reducing red tape. In contrast to the fears of stagflation in the first quarter of 2026, today we cannot rule out a scenario in which inflation is contained, interest rates are less restrictive, and growth is stronger in the second half of the year.

This environment, which is distinguished by a wide gap between perception and reality, benefits active value investors, and our funds have evidenced this. Bestinver Internacional closed the first half with a cumulative return of 16.3%, Bestinfond of 14.4% and Bestinver Bolsa of 7.1%. In fixed income, despite the very challenging circumstances, Bestinver Renta managed to accumulate a return of 1.1% in the first half of the year. But what really matters is that our long-term outlook is positive.

Our companies’ first-quarter results have been very strong, demonstrating their ability to adapt to even the most challenging environments. We have seen positive surprises in both revenue and margin growth, and management teams’ guidance suggests that earnings will continue to increase in the upcoming quarters. Furthermore, stock market volatility has allowed us to reduce our exposure to sectors that have accumulated extraordinary returns and ramp up our exposure to those that have been unfairly lagging. These movements have increased the upside of our funds.

We leave behind a tumultuous and uncertain half-year, in which geopolitics, rather than fundamentals, has driven market performance. Against this backdrop, we stuck to our usual course: tapping volatility to buy into good
businesses for less than they are really worth. As we have explained, the
outlook is positive for the next few quarters. However, we cannot rule out the
possibility of further episodes of market irrationality like those we have seen
in recent months. What we can say is that we will continue to leverage them
to further boost the upside potential of our portfolios.

Finally, many thanks for your continued trust. Wishing you a wonderful summer.

Yours,

Mark Giacopazzi.

 

Download the full quarterly Letter