Global stock markets posted their best quarter since the fourth quarter of 2020, a rebound that began with U.S. leadership before broadening into European markets in June as a U.S.-Iran memorandum of understanding reduced geopolitical tensions.
Barclays strategists, led by Magesh Kumar Chandrasekaran, captured the dynamic succinctly: "U.S.-led initially, before U.S.-Iran MoU drove broadening into EU in June, while AI/Semis were trimmed amid lower oil and Fed hawkishness," the team wrote in a note.
Across a simple 60:40 global stock-bond mix, the recovery was pronounced after a soft first quarter, with every major equity region finishing the period in positive territory, the bank noted.
Oil emerged as the quarter's standout loser, slipping back toward pre-war levels as tail risks receded. That decline in crude prices rippled through other markets: broader commodities and bitcoin also posted losses, and rising real rates put downward pressure on gold.
European equities were a notable outperformer in June. The euro zone, with its cyclical tilt, outpaced the U.K. as falling oil prices favored economically sensitive exposures. Within Europe, peripheral markets such as Italy and Spain led gains, while Germany and France lagged behind.
The U.K. underperformed more broadly, a result Barclays attributed to its heavier weighting in energy and defensive sectors being "less in demand" during the rally.
Japan also outperformed on a more diversified basis, helped by a weaker yen.
On an industry level, Technology was the only global sector to outperform for the quarter. Barclays strategists added that in Europe the outperformance was broader, with Financials and Industrials also faring well amid continued interest in the strategic autonomy theme.
Energy was the quarter's largest underperformer as oil prices fell, a dynamic that later benefited Consumer Discretionary names as the quarter progressed.
Fund flow data pointed to a recovery in equity positioning from the lows seen earlier in the quarter. That rebound was driven largely by hedge funds and systematic strategies re-risking, though those investors trimmed exposure toward the end of June. Real money flows increased sharply after the U.S.-Iran agreement, and retail participation rose as well.
Despite those flows, Barclays found that inflows in Q2 were heavily concentrated in the U.S., with Europe and emerging markets recording the bulk of outflows for the quarter.
Style performance showed momentum as the dominant factor globally and within the U.S., with growth also outperforming on strength in Technology and Semiconductor stocks; value lagged. In Europe, growth and momentum returned more similar results, while low-volatility names underperformed because of their defensive characteristics.
The quarter's narrative was characterized by a shift from concentrated U.S. gains to broader European participation once geopolitical tail risks abated, and by a market re-pricing driven in part by lower energy prices. Flows and style rotation reflected those developments, with tactical re-risking by hedge funds and systematics and a continued preference among many investors for momentum and growth exposures.