THALASSA CAPITAL
Q2 2026 – Written on July 2nd, 2026
We write our new quarterly letter after a very eventful three months which have witnessed an oil shock, a shaky armistice in the Iran war, a new Fed’s Chairman and, finally, the largest IPO in history when SpaceX raised $85.5 billion at a total valuation for the company that in its first two days of trading surpassed $2 trillion.
WHAT IS THE MARKET’S STATE OF PLAY?
At the macro level, we identify three major themes that will continue to characterize global economies and financial markets: rising geopolitical risk, continued fragmentation of supply chains, and the AI super cycle. These are trends that will continue unabated for quite some time and will force reconsideration of risk (in Wall Street as much as Main Street) and reallocation of resources. The cocktail of these trends, in our view, also increases the fat tails of outcome distributions. In simpler words, investors will probably be exposed to a larger than normal set of outliers in upside or downside scenarios.
In hindsight, we were certainly too cautious in our last quarterly letter as the convergent prospect of a significant (and completely unnecessary) oil shock with our skepticism in tech valuations kept us more risk averse than it was eventually required.
However, at this juncture, we are not going to change our stance and while we are respectful of the market message, we continue to believe that higher cushions are needed in portfolio allocations.
Global equities rallied on the back of unexpectedly strong earnings. In fact, a look at earnings growth over the last three years reveals a rise not seen since 2004. However, most of such strength (especially in Emerging Markets) came from the AI super cycle which may be maturing and as discussed in previous missives, was suspiciously circular.
| KEY DATA POINTS SpaceX IPO: $85.7 billion AI Cape YTD: $725 billion2026 S&P500 EPS Estimates: $350 – +29% YoY (JP Morgan) Expected real GDP growth in the US 2H26: 1.5% (JP Morgan) |
A NEW FED’S CHAIRMAN
Jay Powell’s reign at the Fed finally came to an end after an acrimonious battle with the White House in the name of preserving the central bank’s much needed independence. Kevin Warsh ultimately won the casting session and while he lobbied for the job on the message for lower rates (a nod to the White House), once confirmed as the top banker in the world, he sang a decisively more hawkish tone. Warsh has also alluded to the formation of “task forces” to re-engineer the Federal Reserve and according to previous remarks has started to reduce the sharing of information to the public.
It is too early to say how monetary policy will land with the new leadership, but for now it would seem that unless the economy drops suddenly, we should not expect rate cuts in 2026.
OUR POSITIONING AND STRATEGY
As indicated earlier, we feel that a cautious stance is required. We like to overweight cash allocations which still pay a respectable risk-free yield, we suggest deleveraging of high beta names and, we advise to include fixed income positions diversified by duration and geographic exposure. For the large accounts, we think that hedge funds focused on strategies with very little correlation to the S&P500 will provide good risk adjusted value to portfolios.
Equities
We continue to like diversified infrastructures, domestic and international. Our core energy infrastructure exposure served us well during the oil shock and should continue to provide strong cash flows in the form of inflation adjusted distributions. However, we do not expect significant expansion of valuation multiples.
On a long-term basis, we like renewable energy and the electrification theme, but we fear that the current valuations might not justify a full exposure. We would be buyers on dips.
We have been partial to the Aerospace and Defense sector for a while as an expression of our idea of rising geopolitical risk. Current valuations are not cheap, but we feel this is a long-term cycle and, again, we would be buyers on dips.
We also continue to like Pharma and Biotech on numerous counts: valuations are more attractive than tech, a general defensive characteristic, and M&A activity.
Fixed Income
Bonds have not provided great total returns YTD as the self-inflicted inflationary wounds of policy choices have prevented a reduction of rates. Additionally, the resilience of the economy in the face of many headwinds has also reduced the need for capital flights to bonds.
However, yields are significant and in a market downturn, we still feel bonds should provide a buffer.
We have moved most fixed income allocations to a variety of durations as the interest rate picture remains murky.
CLOSING THOUGHTS
In conclusion, while we acknowledge the level of uncertainty in the current environment, we want to model portfolios’ exposures in ways where no unnecessary risk is taken and yet upside optionality is retained.
There is fundamental momentum behind this market, but risks are building up. Should Open AI and Anthropic also follow up on their intention to go public, the trifecta of IPOs (including SpaceX) would probably call the top. Historically, market performance after a series of mega IPOs is decisively underwhelming.
We remain committed to the investment philosophy that has guided this firm from the beginning: patient, disciplined, research-driven capital allocation with an unwavering focus on risk-adjusted returns. We are grateful for your continued trust and partnership.
Respectfully yours,
Davide Accomazzo
Chief Investment Officer
Youri Bujko
Chief Executive Officer
IMPORTANT DISCLOSURES
This letter is provided for informational purposes only and does not constitute investment advice, a solicitation, or an offer to buy or sell any security. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. The views expressed herein reflect the current opinions of Thalassa Capital LLC and are subject to change without notice. References to outside research firms are for informational context only; Thalassa Capital LLC has no affiliation with such institutions unless otherwise disclosed. This letter is intended solely for the use of the person to whom it is addressed and may not be reproduced or redistributed without prior written consent.