U.S. Stocks H1: Energy Led Then Pulled Back, Tech Took the Baton
Taylor Wilson
US equities staged a mirror-image sector flip in H1 2026 — energy surged 37% in Q1 on war-driven oil prices, then dropped 13% after a ceasefire; tech reversed a Q1 8% decline into a 32% year-to-date gain as AI enthusiasm reignited. The handoff point is the next month's chip and Big Tech earnings season.
Why did energy dominate Q1?
The Iran war pushed oil-price expectations higher; WTI crude neared $120 a barrel, and the Energy Select Sector SPDR ETF (XLE) surged 37% in Q1.
The S&P 500 fell nearly 5% over the same period. This means → rising oil prices weighed on earnings outlooks across most sectors, funneling capital into energy as the single high-conviction trade.
In plain terms = war pushed oil up, oil pushed energy stocks up — but almost every other sector paid the price of war risk.
How did the reversal happen after the ceasefire?
As ceasefire plans advanced, WTI fell from near $120 in early April to roughly $70 today; energy stocks have dropped about 13% since April.
Tech staged a full-sector comeback: the Technology Select Sector SPDR ETF (XLK) is up 32% year-to-date, despite a nearly 8% Q1 decline.
This reflects a narrative switch — the market's core story moved from "war premium" to "AI revival," with memory chips and semiconductors leading the rebound.
Is tech expensive at these levels?
The tech ETF trades at roughly 26× this year's expected earnings, slightly below its five-year average forward P/E of 27.5×.
VistaShares strategist David Fetherstonhaugh's read: tech is "still attractive, but not cheap."
In plain terms = valuations are not in bubble territory, but there is no discount either — whether the price holds depends entirely on upcoming earnings.
What should investors watch over the next 30–45 days?
Fetherstonhaugh told *Barron's*: Micron's strong results provided one signal, but the real test is whether TSMC, ASML, and the major hyperscale cloud companies can sustain the momentum.
Micron, SK Hynix, and AMD are core holdings in the VistaShares AI Supercycle ETF.
This means → the durability of this tech rally will be judged collectively during chip and cloud-giant earnings season.
Which other sectors are riding the AI buildout?
BlackRock's midyear report noted: AI demand is surging, but capacity cannot keep up — large-scale AI buildout requires power, data centers, chips, memory, skilled labor, and critical materials.
The Industrial Select Sector SPDR ETF is up 19% year-to-date; the Real Estate Select Sector SPDR ETF is up 10%, both benefiting from data-center construction demand.
Financials, communication services, and healthcare — sectors that stumbled in Q1 — rebounded in Q2 and now trade at 16–20× earnings. PNC Asset Management CIO Amanda Agati said: "I cannot see anything that would derail economic or earnings growth."
How long can earnings sustain this pace?
Per FactSet, S&P 500 Q1 earnings grew 28.8% year-over-year, led by tech, communication services, and materials.
Analysts forecast Q2 year-over-year earnings growth of 23.1%, well above the five-year average of 16.4%.
In plain terms = earnings growth still runs far above its historical norm, but that also means the market's expectations are already high — any miss could trigger meaningful pullback pressure.
Content is for reference only, not financial advice.