Market Letter Q2 2026
The second quarter highlighted the market’s ability to navigate competing forces. Early in the year, investor concerns centered on the conflict between the U.S. and Iran, rising oil prices, and renewed inflation pressures. By quarter-end, those worries had largely subsided, allowing strong corporate earnings, continued enthusiasm around artificial intelligence (AI), and a resilient economy to drive markets higher.
Key Highlights from the First Half of 2026
- U.S. stocks remained strong, with the S&P 500 up approximately 10% year-to-date through June 30.
- AI-related investment continued to accelerate, supporting technology, semiconductors, cloud infrastructure, and utility companies tied to growing data-center demand.
- Market gains broadened beyond the largest technology companies, with small-cap stocks, international equities, and emerging markets posting strong returns.
- Corporate earnings exceeded expectations, reflecting healthy business conditions across many sectors of the economy.
- Interest rates moved higher as inflation remained elevated, creating headwinds for bonds but also increasing income opportunities for fixed-income investors.
- The U.S. economy remained resilient, supported by low unemployment, strong capital investment, and consumer spending.
Looking Ahead
While the headlines have shifted from geopolitical concerns back toward AI-driven growth, investors should remain mindful of several factors that could influence markets in the second half of the year:
- Inflation remains above the Federal Reserve's target, which could keep interest rates elevated for longer.
- Geopolitical risks have eased but have not disappeared.
- The rapid pace of AI-related investment and innovation continues to create opportunities but also raises expectations for future growth.
- Higher bond yields may provide attractive income opportunities and help improve long-term return potential for fixed-income investors.
Our Perspective
Markets will undoubtedly continue to react to economic data, geopolitical developments, and evolving expectations around AI. However, history has consistently shown that successful investing is built on maintaining a disciplined, long-term perspective rather than reacting to short-term headlines.
We remain focused on thoughtful diversification, helping manage through market ups and downs, and identifying opportunities across asset classes. Recognizing that successful investing works best when it remains aligned with a well-defined financial plan.
Thank you for your trust and confidence.
Sharon Calhoun
Managing Director
Jason Ranallo
COO, Director of Portfolio Management
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