Q2 2026 QiM Fact(or) Sheet
This remains an exceptionally narrow, AI‑driven rally, with semiconductor exposure accounting for the majority of market and earnings upside.
- Market - Equity gains were heavily concentrated in technology hardware and semiconductors, with most other sectors lagging the broader market. Earnings revisions followed the same pattern, remaining confined to AI-linked hardware segments.
- Macro - Strong U.S. growth and AI infrastructure spending outweighed headwinds from sticky inflation, a hawkish Fed and geopolitical volatility in the Middle East.
- Breadth - While dominance of the “Mag 7” has faded, leadership has not broadened, remaining concentrated in semiconductors.
- Sectors - Information Technology led, driven by semiconductor and hardware companies benefiting from AI-related demand and near-term supply constraints (particularly in memory). Industrials saw limited spillover from the same theme, while Energy retraced earlier gains as crude prices normalized.
- Countries - Taiwan and South Korea outperformed, reflecting their direct exposure to the semiconductor supply chain (TSMC, Samsung, SK Hynix).
- Factors - Exposure to semiconductors defined the quarter, directly benefiting Momentum and hurting Low Volatility and Quality.
Source: SEI QiM, using data from MSCI and FactSet. Data as of June 30, 2026. Past performance is not an indication of future performance.
Factor families
Exhibit 1: Q2 2026 Investable factor proxies versus respective capitalization weighted indexes
Source: SEI, based on data from MSCI, Axioma and FactSet. Data as of June 30, 2026. Returns quoted in USD. Metrics are composites of underlying ratios that SEI has determined to be appropriate measures of each factor. Data refers to past performance of top-tercile factor-proxy portfolios vs. the capitalisation-weighted benchmark and rebalanced quarterly. Returns are for illustrative purposes only and do not represent actual fund performance. Excess returns measured against (in descending order): MSCI ACWI Large Cap, MSCI USA Large Cap, MSCI EAFE Large Cap, MSCI EM Large Cap, MSCI USA Small Cap, MSCI EAFE Small Cap Indexes. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance is no guarantee of future results.
Outlook
Over the quarter we have trimmed our pro-value positioning, but remained firmly overweight on the basis of:
- Wide valuation spread.
- Higher long-term interest rates (vs long-term average).
Exhibit 2: Q2 2026 Active factor family positioning.
Source: SEI, the axis displays z-score exposure versus benchmark, as of June 30, 2026. Long term average exposure from January 31, 2003, to current. Benchmark: MSCI World Index.
Z-scores tell us how exposed a portfolio is to a factor, compared to a benchmark, based on what's normal for that factor. It is a common "currency" of portfolio exposures, making unrelated raw metrics like P/E or ROE comparable to each other.
A value of zero means the portfolio is neutral to the benchmark for that factor.
Higher values mean the portfolio has more exposure to that factor than the benchmark.
Economic indicators
US.: Growth remains resilient as inflation pressures persist
Jobs: Labour market remains resilient
- Nonfarm Payrolls: at 172K, above expectations and prior quarter. (-156)
- Unemployment Rate: 4.3%, in line with expectations and prior quarter.
- Initial Jobless Claims: 213.25K quarter average, broadly in line with previous quarter average of 211.9K.
Inflation: Underlying price pressures remain elevated
- Core CPI: 2.9 (YoY), in line with expectations and above prior quarter. (2.5%)
- Core PCE Deflator: 3.4% (YoY), marginally above expectations and prior quarter. (3.0%)
- Hourly Earnings (preliminary): 3.4% (YoY), below expectations and prior quarter. (3.7%)
Consumer: Spending remains resilient despite weaker sentiment
- Retail Sales: 0.88% (MoM, SA), above expectations and in line with prior quarter. (0.92%)
- Michigan Sentiment (preliminary): 48.9, marginally above expectations and below prior quarter. (56.6)
- Consumer Confidence: 91.2, in line with expectations and prior quarter. (91.8)
Manufacturing and Services: Business activity remains in expansion
- S&P PMI Manufacturing SA (preliminary): 55.7, above expectations and prior quarter.
- S&P PMI Services, SA (preliminary): 51.3, in line with expectations and prior quarter.
- Empire State Index, SA: 5.7, below expectations and above prior quarter.
The rest of the world
China: Growth remains supported despite signs of cooling
- Exports: 19.4% (YoY), above expectations and below prior quarter. (21.8%)
- S&P PMI manufacturing: 51.8, in line with expectations and prior quarter. (52.1)
- S&P PMI services: 54.4, above expectations and below prior quarter. (56.7)
- CPI: 1.2% (YoY), in line with expectations and prior quarter. (1.3%)
Japan: Manufacturing remains resilient as services soften
- CPI Core National: 1.4% (YoY), in line with expectations and prior quarter.
- S&P Manufacturing PMI (preliminary): 54.9, in line with expectations and prior quarter.
- S&P Services PMI: 50.0, below prior quarter.
Germany: Growth shows tentative stabilisation
- CPI EU Harmonized: 2.7% (YoY), above prior quarter.
- S&P Manufacturing PMI (preliminary): 50.0, in line with expectations and prior quarter.
- S&P Services PMI (preliminary): 46.8, below expectations and prior quarter.
U.K.: Inflation eases as economic activity softens
- CPI Core: 2.6% (YoY), in line with expectations and below prior quarter. (3.0%)
- Services inflation dropped from prior 4.2%to 3.2% suggesting the underlying domestic inflation easing materially. however, goods inflation and producer prices reaccelerated, highlighting continuing import-cost pressures.
- S&P Manufacturing PMI (preliminary): 53.1, in line with expectations and above prior quarter.
- S&P Services PMI (preliminary): 48.7, below expectations and prior quarter. (53.9)
Source: FactSet. Past performance is not a reliable indicator of future results.
Sector and country returns
Exhibit 3: MSCI All Country World Index
Source: SEI, MSCI. As of June 30, 2026. Past performance is not a reliable indicator of future results.
Glossary and index definitions
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