In a replay of 2025, U.S. policy decisions during the first quarter of the year left markets with room to gain in the second quarter as geopolitical risks abated. Last year it was tariff policy, this year it was the beginning of the U.S. military conflict with Iran in late February. Even though the first quarter saw the biggest oil price jump since 1990 when the Gulf War began, the second quarter saw the biggest oil price decline since the pandemic began in 2020 with Brent crude closing near pre-conflict levels. A strong first quarter earnings season also supported markets with global equities gaining almost 15% in the second quarter 2026. Emerging markets lead the way with a 24% increase boosted by the technology heavy Taiwan and South Korean indices.

During the quarter, markets welcomed Kevin Warsh as the new Chair of the Federal Reserve. In the press conference after his debut Fed meeting in June, he made it clear that the Fed would be focused on getting inflation back to their 2% target. This caused short-term interest rate markets to adjust their expectations higher for the balance of 2026. With Fed’s preferred inflation metric running at 3.4%, Warsh and his colleagues have a fair amount of work to do. The European Central Bank and Bank of Japan both raised rates during the quarter. As we close the books with strong equity markets for the quarter, we look toward a summer that will have two very active Fed meetings and continued geopolitical risk.

Global equities, as measured by the MSCI ACWI Index, were up 14.9% during the quarter, putting them up 11.2% in 2026. International stocks, represented by the MSCI EAFE index, lagged with a gain of 10.8% during the quarter, leaving them up 9.4% year to date. The S&P 500 rallied 15.2% in 2Q26, leaving it slightly ahead of international stocks with a 2026 gain of 10.2%. Emerging market stocks were the top performer for the quarter, up 24.1%, which leaves them up 23.8% on the first half of 2026. Growth outperformed during the quarter with the Russell 1000 Growth index up 16.7% versus 13.9% for the Russell 1000 Value Index. However, value maintained its lead year to date up 16.3% versus 5.3% for growth. Fixed income markets posted modestly positive returns as yields drifted lower with oil prices. The Bloomberg Aggregate Bond Index gained 0.7% for the quarter, leaving it up 0.6% for the year-to-date period. U.S. long-term treasuries gained 0.9% for the quarter bringing them to 0.4% on the year-to-date period. High-yield bonds crept higher with a 2.5% gain, and up 1.9% in 2026 making them the fixed income leader at the halfway mark.

Real assets were mixed but maintained strong year-to-date returns. The Bloomberg Commodity Index was down –8.1% for the quarter but up 14.4% the year-to-date. REITs were up 12.2% during leaving them up 17.6% year to date.

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