Monthly Review – June 2026
OUR PERSPECTIVE
“Stability is destabilizing.” ~ Hyman Minsky
The AI boom may be technologically real, but the price investors are paying for it is increasingly financed by borrowed conviction.
FINRA’s May data show US margin debt at a record $1.4 trillion, up roughly 54% from a year earlier. As exhibit 1 and 2 shows, that is equivalent to approximately 334% of customers free credit balances and around 4.4% of US GDP. These figures are not merely evidence of optimism; they measure the fuel now sitting beneath the market.
More troublingly, leverage has grown considerably faster than the underlying economy and the cash cushions available to absorb losses. That is the signature of a market in which exposure – and sentiment – is expanding faster than its capacity to withstand a reversal.
Margin debt rarely creates a bull-market narrative, but it radically changes its transmission mechanism. Rising share prices increase collateral values; stronger collateral permits more borrowing; and additional borrowing finances further purchases. The market appears to validate the original investment thesis, although part of that validation has been manufactured by leverage itself. This is the Minsky dynamic in real time: stability encourages risk-taking until the system becomes less stable precisely because it has looked so stable.
The process is reflexive and brutally symmetrical. When prices fall, collateral contracts, margin calls arrive and discretionary investors become forced sellers. Price discovery gives way to liquidation. Leverage did not single-handedly cause the reversals of 2000, 2008 or 2022, but it accelerated each adjustment and compressed months of reconsideration into days of selling.
Artificial intelligence adds a second layer. Five major US Hyperscalers are expected to spend around $697 billion in 2026, while capital expenditure has risen from 33% of their operating cash flow in 2023 to an estimated 93% this year. Technology is therefore shifting from an unusually capital-light model towards a capital-intensive infrastructure race.
That does not mean AI is a fraud or that the boom must collapse. Transformative technologies – from railways to the internet – often justify enormous investment. Yet economic usefulness and investment profitability are not the same thing. Investors are increasingly borrowing to own companies committing ever larger amounts of future cash flow to an uncertain monetisation curve.
The danger is not that AI fails. It is that success arrives later than leveraged markets can tolerate. A cash-funded bull market can wait; a borrowed bull market is hostage to time, volatility and funding costs.
Margin debt is money borrowed from a broker to purchase securities, using the investor’s portfolio as collateral. It amplifies both gains and losses: rising markets can support further borrowing, while falling prices may trigger margin calls and forced selling. High or rapidly increasing margin debt can therefore signal elevated speculation, liquidity dependence and greater market fragility.
Market Review
Deflationary Boom Assets
(Equities, Corporate Bonds, EMD)
Risk assets weakened modestly in June as the AI-led bull market finally encountered gravity. Global equities declined 0.64% (USD), with US equities down 0.78% and the Nasdaq falling 2.75%. The most striking reversal came from the Magnificent Seven, which lost 8.81% as investors questioned elevated valuations, concentrated positioning and increasingly debt-funded AI investment. Europe ex-UK gained 1.5% in USD terms, while India rose 1.65% (USD), suggesting rotation rather than wholesale risk aversion. China was the weakest major region, falling 3.6% (USD). Corporate bonds remained resilient as spreads stayed contained, while emerging-market debt were up circa 20bps.
Deflationary Bust Assets
(Government Bonds)
Government bonds produced modest gains despite a less supportive monetary-policy backdrop. US Treasuries returned 0.28%, UK Gilts gained 0.68% and euro-area sovereign bonds rose 0.40%. The Federal Reserve maintained its policy range at 3.50%–3.75%, while the Bank of England held Bank Rate at 3.75%, with two members voting for an increase. Falling oil prices provided some relief to inflation concerns, although persistent underlying inflation limited the duration rally. The dollar’s 2.33% appreciation also reduced USD returns from non-US bonds, leaving the Global Aggregate down 0.71%.
Inflationary Boom Assets
(Commodities & Managed Futures)
Commodities suffered a violent reversal as geopolitical risk premiums evaporated. Brent crude fell 21%, while the broader energy complex declined 13.7%, as improving prospects for Iranian supply and the reopening of the Strait of Hormuz reduced fears of sustained shortages. Industrial metals fell 7.5%, although copper remained positive year-to-date. Managed futures struggled with these abrupt trend reversals: the SG CTA and SG Trend indices declined 1.35% and 1.7%, respectively, as established commodity, currency and bond positions were whipsawed.
Inflationary Bust Assets
(Precious Metals & Inflation-Linked Bonds)
Gold experienced its worst month since 2008, falling 11.7%, while the broader precious-metals index lost 13.9%. A stronger dollar, rising expectations of renewed Federal Reserve tightening and reduced geopolitical anxiety prompted profit-taking after an exceptional prior advance. Inflation-linked bonds also underperformed nominal sovereigns as collapsing energy prices compressed near-term inflation expectations: US TIPS declined 0.47%, UK linkers lost 0.72% and euro linkers fell 0.15%.
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Important information
Shard Capital Partners LLP is a limited liability partnership, registered in England with registration number OC360394. Shard Capital Partners LLP Registered office: Floor 3, 36-38 Cornhill, London, EC3V 3NG. Shard Capital Partners LLP is authorised and regulated by the Financial Conduct Authority in the United Kingdom, reference number 538762.
This document is provided for information purposes only and is intend for confidential and sole use by the recipient. It is not to be reproduced, copied or made available to others. The information set out in this document does not constitute investment advice or a personal recommendation. The views expressed in this document are not intended as an offer or a solicitation, to purchase or sell any security or other financial instrument, credit or lending product or to engage in any investment activity.
Past performance is not a guide to future performance. It is important that you understand that with investments, your capital is at risk. The value of investments, as well as the income derived from them, can go down as well as up and investors may get back less than the original amount invested. It is your responsibility to ensure that you make an informed decision about whether to invest with us, based on your particular objectives. If you are still unsure if investing is right for you, please seek independent advice.
The information and opinions expressed within this document are the views of (the company) and are based on information we believe to be reliable, but we do not represent that they are accurate or complete, and they should not be relied upon as such. Any information provided is given in good faith but is subject to change without notice.
No liability is accepted whatsoever by (the company) or its employees and associated companies for any direct or consequential loss arising from this document.
Disclaimer:
This document is provided for information purposes only and is intend for confidential and sole use by the recipient. It is not to be reproduced, copied or made available to others. The information set out in this document does not constitute investment advice or a personal recommendation. The views expressed in this document are not intended as an offer or a solicitation, to purchase or sell any security or other financial instrument, credit or lending product or to engage in any investment activity.
Past performance is not a guide to future performance. It is important that you understand that with investments, your capital is at risk. The value of investments, as well as the income derived from them, can go down as well as up and investors may get back less than the original amount invested. It is your responsibility to ensure that you make an informed decision about whether to invest with us, based on your particular objectives. If you are still unsure if investing is right for you, please seek independent advice.
The information and opinions expressed within this document are the views of (the company) and are based on information we believe to be reliable, but we do not represent that they are accurate or complete, and they should not be relied upon as such. Any information provided is given in good faith but is subject to change without notice.
No liability is accepted whatsoever by (the company) or its employees and associated companies for any direct or consequential loss arising from this document.