Market Commentary

First Half 2026 Complete – What’s Ahead

June’s market performance was a mixed bag in closing out the first half of the year. The NASDAQ and S&P 500 both traded lower for the month, while the DOW and Russell 2000 ended in the black. The AI trade witnessed the hyperscalers moving from self-funded capex to debt and equity issuance…opening up rate sensitivity to the theme.

S&P 500:                              Jun  -1.07%              YTD (Jul 7)  +9.62%
DOW:                                    Jun  +2.52%             YTD (Jul 7)  +10.11%
NASDAQ:                             Jun  -2.81%              YTD (Jul 7)  +11.09%
Russell 2000:                     Jun  +3.69%             YTD (Jul 7)  +20.22%

 Sector Performance YTD:

Communication Services  +4.53%
Consumer Discretionary  -0.60%
Consumer Staples  +9.02%
Energy  +21.59%
Financials  +2.30%
Healthcare  +6.27%
Industrials  +17.58%
Technology  +15.18%
Materials  +12.46%
Real Estate  +11.95%
Utilities  +7.01%

Current Treasury Rates:

6 Month Bill            3.87%
2 Year Note             4.22%
5 Year Note             4.33%
10 Year Note           4.59%
30 Year Note           5.08%

The US and Iran signed the MOU, opening up the Strait of Hormuz. Oil prices continued to retreat, down 35% from the end of April. This has eased the inflation picture. Consumer cyclicals and discretionary equities moved up on the $70 crude oil, while energy securities lagged.

Last night, the US had multiple strikes against Iran, in retaliation for Iran’s targeting of two ships in the Straight. Crude oil jumped this morning to $74. The Iran war continues to play a major role in how this market behaves. Geopolitical risks remain heightened.

Fed Chair Warsh left rates unchanged (3.50%–3.75%) in his debut. Warsh’s tone was hawkish, with an emphasis on price stability over employment and a displeasure with inflation having stayed elevated from the 2% target for five years. We don’t see the Fed raising or cutting rates in 2026.

The economy is stable despite the softer than expected June employment number. The surge in Spring hiring has slowed into a more normal pace. The Household Survey report stated an unusually high number of labor force exits among 25-34yr old males. Most likely, an anomaly in the data as the labor market remains steady.

After Q1’s remarkable 28.6% earnings growth, analysts are projecting Q2 year-over-year growth for the S&P 500 at 23.3%. Upward EPS revisions have moved the growth number higher since the end of March (18.8%). Corporate earnings releases for Q2 begin in earnest next week with the banks.

There is almost $8 trillion in money market funds. This is a hedge to volatility, while waiting to be invested in the equity market. This is despite a record $560 billion flowing into ETFs during the second quarter.

Volatility in equity markets has been violent. Rotation in the market expansion has endured massive price swings. Value names win one day only to reverse in a day or two, giving up gains to growth securities. AI continues to drive the market narrative; one that implies further productivity and cost reductions. The technology is not viewed as a job killer.

We remain long equities with cash on hand for portfolios. We believe the second half of 2026 will see markets move higher into year-end, albeit with heightened volatility. Stock picking remains paramount. Short duration in fixed income holdings persists. We continue to be constructive on the market.