June, Second Quarter 2026 Assessment and Outlook

Government Abstract 

• The SOX Index posts its greatest quarter (+89%) since inception in 1994
• S&P 500 and Nasdaq 100 document greatest quarter in six years
• Hawkish June FOMC drives bullish reversal within the dollar
• Charges risky amid bull steepening
• Crude oil absolutely reverses Iran struggle rally
• Traders anticipate strong Q2 earnings and income progress

Following a turbulent Q1 characterised by elevated volatility and corrective worth motion stemming from the U.S.- Iran battle and considerations over world commerce, U.S. fairness markets delivered a robust advance in Q2 2026 ending in one of many strongest quarterly durations of this century. Each the S&P 500 and Nasdaq-100 recorded their greatest quarter since Q2 2020, whereas the Nasdaq-100 notched its second-best quarterly efficiency within the final 25 years. The preliminary beneficial properties off the March lows have been pushed by large-cap progress and hyperscalers; nonetheless, by quarter’s finish, the breadth of the advance was widespread, with small, microcap, equal weight, and worth benchmarks all reaching new document highs. The quarter was headlined by strong momentum in Technology and AI‑pushed themes, robust company earnings and income progress, increasing margins, an easing of the U.S.-Iran battle, price volatility amid bull steepening, and a bullish reversal within the U.S. greenback.

The cap-weighted S&P 500 peaked again on June 2, whereas the S&P 500 Equal Weight is breaking out to new highs as of July 1.

 

AI and semiconductors remained the core theme, pushed by robust capex and strong demand for reminiscence chips. Whereas choose pockets of the Technology house underwent revenue taking late in Q2, semiconductor and reminiscence chip firms soared. The Philadelphia Semiconductor Index (SOX Index) rocketed greater and recorded double-digit beneficial properties in all three months for its greatest quarterly efficiency (87.8%) since inception in 1994.

 

Development & Worth

 

Development outperformed over the course of the second quarter, persevering with to drive total market returns and reinforcing its place because the dominant management issue throughout the broader uptrend. Efficiency on this class was anchored by Technology-oriented themes, which benefited from robust earnings momentum and sustained investor positioning. That management started to shift in June as market dynamics developed. Inside giant caps, worth outperformed as traders rotated out of prolonged progress positions and into sectors extra delicate to financial resilience and better charges. This marked an inflection level characterised by broadening participation. 

 

Massive-cap sector efficiency was broadly constructive in Q2, with 9 of 11 sectors ending greater. Nevertheless, June marked a transparent shift in management giving technique to outperformance in additional cyclical and defensive areas of the market. Industrials financials and healthcare outperformed, whereas communications and Technology lagged from near-term revenue taking. Power underperformed for the second consecutive month as oil costs returned to pre-crisis ranges. Whereas the Technology sector capturedthe majority of media protection, industrials are the highest performing sector YTD with a 20.1% whole return.

 

Small-Cap Sectors

 

After lagging in Q1, small caps charged again in Q2 with 10 of 11 sectors greater, led by robust double-digit beneficial properties in Technology, industrials, healthcare, discretionary, and financials underscoring elevated investor confidence in underlying progress circumstances.

Within the first week of April, the small-cap Russell 2000 Index was buying and selling marginally under its prior cycle highs from November 2021 earlier than rebounding greater than 26% into quarter’s finish. 

 

Charges, Commodities, and the Greenback

In his first assembly as Chairman of the Federal Reserve, Kevin Warsh struck a surprisingly hawkish tone on the June FOMC, expressing better inflation considerations than what markets anticipated. Markets began the 12 months pricing decrease charges till the April surge in vitality costs from the Iran struggle modified these expectations. The newest studying of the Fed’s most well-liked inflation gauge (core PCE) rose for the third consecutive month to three.4% (Might). Markets are actually pricing in 33bps of price hikes by 12 months finish.

The hawkish FOMC resulted in a flattening of spreads which drove the 10s, 2s UST unfold to its lowest degree since March 2025. 

 

The lengthy finish of the Treasury curve was pressured by the sharp reversal in vitality costs because the U.S. and Iran halted army operations and moved towards a negotiated peace. After rising greater than 64% within the early phases of the battle, Brent crude oil declined 19.3% and 20.8% in April and Might, respectively, leaving IT just about unchanged from pre-war ranges. 

 

The hawkish tone of the June FOMC had a extra pronounced impression on the U.S. Greenback. Again within the 1H of 2025, the US Greenback Index (DXY) had considered one of its steepest 6M declines on document. IT then transitioned right into a sideways, buying and selling vary over the following 12 months. Instantly following the June FOMC, the dollar made a “bullish breakout,” doubtlessly signaling a longer-term uptrend is at hand.

 

Trying Forward  

The S&P 500 is anticipated to ship robust outcomes on each the top- and bottom-line for Q2 2026. Q2 earnings progress (YoY) expectations have risen from +18.8% on the finish of Q1 to 23.1%, in accordance to FactSet. Income expectations have additionally trended greater all through the quarter, with Q2 income progress forecasts rising from 9.5% on the finish of Q1 to at present 12.3%. This could mark the best income progress price since Q2 2022. The mix of accelerating income progress and a bigger enhance in EPS progress implies continued margin growth, in line with the broader development noticed over the previous a number of quarters. From a valuation perspective, the S&P 500 is buying and selling at a ahead 12-month P/E of ~20.1x, modestly above each its 5-year (19.9x) and 10-year (19.0x) averages.

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