Market Viewpoints
Summer 2026
By Keith Bonjour, CFP®
Senior Vice President, Portfolio Manager
The second quarter of 2026 concluded with the U.S. economy demonstrating resilience despite continued geopolitical uncertainty and lingering inflation pressures. Economic growth remained
positive, supported by strong productivity gains, ongoing investment in artificial intelligence infrastructure, and steady consumer spending. While the conflict in the Middle East and related energy market disruptions created periods of uncertainty during the quarter, economic activity continued to expand, and business investment remained healthy in several key sectors.
Inflation remained a primary concern throughout the quarter. Energy prices surged early in the period as tensions in the Middle East disrupted markets and raised concerns about global oil supplies. Although oil prices retreated later in the quarter as trade routes stabilized and geopolitical tensions eased, inflation readings remained above the Federal Reserve’s long-term 2% target. Policymakers increasingly expressed concern that inflation could remain elevated longer than previously anticipated, particularly if energy prices or supply chain disruptions reemerge.
Labor market conditions remained stable during the quarter. Hiring continued at a slower pace than in prior years, but unemployment remained near the low-to-mid 4% range. While employment growth has moderated, the labor market continues to reflect a gradual normalization rather than significant economic weakness. Wage growth remains positive, supporting household spending and helping sustain overall economic activity.
The Federal Reserve maintained its target federal funds rate at 3.50%–3.75% throughout the second quarter, extending the pause that began after the series of rate cuts implemented during 2025. At its June meeting, the Fed emphasized that inflation remains too high and removed much of the prior language that had suggested additional rate cuts were likely. Updated projections reflected a more cautious outlook, with many policymakers now forecasting no rate cuts, or even the possibility of a rate increase before year-end if inflation does not improve. As a result, markets increasingly shifted toward a “higher-for-longer” interest rate environment.
Equity markets delivered strong returns during the quarter despite elevated volatility. After a difficult period earlier in the year, investors regained confidence as earnings growth exceeded expectations, particularly among technology and artificial intelligence-related companies. The S&P 500 and the Nasdaq Composite had one of their strongest quarterly performances since 2020. Small-cap stocks also performed well, benefiting from improving investor sentiment and expectations for continued economic expansion. International equities generated positive returns but lagged several U.S. market segments.
The bond market produced modest but positive returns during the quarter. Treasury yields moved higher overall as investors adjusted expectations for future Federal Reserve policy and inflation remained stubbornly elevated. Despite the pressure from higher rates, fixed-income investors continued to benefit from attractive income opportunities, with starting yields remaining among the most compelling levels seen in several years. Investment-grade corporate bonds, high-yield bonds, and municipal bonds all generated positive returns during the quarter.
As we move into the second half of 2026, investors continue to monitor several key risks, including inflation trends, Federal Reserve policy, geopolitical developments, and the path of global economic growth. While market volatility is likely to persist, strong corporate earnings, ongoing innovation in artificial intelligence, and a fundamentally healthy economy continue to provide reasons for optimism. We remain committed to maintaining a disciplined, long-term investment approach and believe that diversification and patience remain essential components of successful investing.
If you anticipate any near-term cash needs, please contact us so we can proactively manage distributions and help protect your portfolio from potential market volatility.
Thank you for your continued trust and confidence. We remain committed to making prudent investment decisions as we navigate an evolving market environment on your behalf.