June 2026 Market Commentary

Market Update and Economic Developments

• US. large cap equity growth slowed in June after a strong second quarter, with the S&P 500 Index finishing slightly negative for the month (-0.95%) and up 15.20% for the quarter—the best second quarter for the S&P in six years. Although geopolitical tensions in the Middle East and a more hawkish Federal Reserve weighed on investor sentiment, broad market performance remained resilient, with the index up 10.21% year-to-date (YTD). This year’s rally has been markedly different than prior years: the Magnificent 7 have been responsible for only 1% of the S&P 500’s YTD return, and five out of the seven companies were negative in June. The last 30 days have intensified the broadening beyond the largest technology companies, which is beginning to create a less concentrated overall market.
• Small-cap stocks have been one of the stronger areas of the market in 2026, with the Russell 2000 Index gaining 3.74% in June and over 22% YTD, more than doubling the YTD performance of large-cap equities. Despite higher interest rates typically presenting a more difficult environment for smaller cap stocks since they rely more heavily on floating rate debt, the improving economic growth expectations and a rally in smaller technology and biotech stocks have fueled the asset class’s resurgence.
• Emerging market equities faced a modest setback in June despite exhibiting exceptional YTD performance. The MSCI Emerging Markets Index declined 1.41% during the month as stronger U.S. interest rate expectations, a firmer dollar, and geopolitical uncertainty pressured international assets. Even after June’s weakness, emerging market equities remain among the best-performing equity categories in 2026 with a gain of nearly 24% year-to-date, due in part to attractive relative valuations, improving earnings growth, and dollar weakness for much of the first half of the year. Short-term volatility does little to diminish the longer-term diversification benefits these markets can provide.

• 

Fixed Income Market Update 

• Fixed income delivered only modest gains in June as persistent inflation concerns kept upward pressure on longer-term Treasury yields. Although the Bloomberg U.S. Aggregate Bond Index posted a positive return of 0.24% for the month, total returns have remained subdued throughout 2026 as investors reassess the likelihood that interest rates will remain elevated. Rising inflation expectations following the shock to energy prices have prevented longer-duration bonds from providing the level of diversification investors have historically expected during periods of market uncertainty.
• The Federal Reserve left the target interest rate unchanged at 3.50%–3.75% during its June meeting, but the tone of the meeting was notably more inclined to rate hikes relative to earlier this year. Updated economic projections showed the median Federal Open Market Committee participant now expects one rate increase before year-end rather than a rate cut, reflecting continued concern over inflation remaining well above the Fed’s 2% objective. Consistent with this shift, futures markets in June have increasingly priced in the possibility of at least one additional rate hike before the end of 2026.
• Oil prices retreated meaningfully in the second half of June as tensions in the Middle East eased, allowing gasoline prices to begin moving lower. Triple A (AAA) now reports an average gasoline price of $3.85 per gallon, down from $4.32 a month ago. While this decline should provide some relief for consumers, the inflationary effects of higher energy costs typically work through the economy with a lag. Transportation, manufacturing, and distribution costs often take time to normalize, meaning the earlier oil shock is likely to continue exerting upward pressure on prices even if crude oil remains below its recent highs.