Q2 Market Update
Market Summary¹:
Equities rebound in the Second Quarter: MSCI All Country World Index Excluding USA finished up 13.66% year to date while the Russell 3000 Total Return finished just under 11% year to date through June 30, 2026.
Small Cap stocks: Year to date, Small Cap stocks as measured by [Russell 2000 Total Return have generally outperformed Mid and Large Cap stocks as measured by [Russell Midcap Total Return and Russell 1000 Total Return indices respectively. This marks a reversal from the past several years, when mega-cap tech stocks dominated returns.
Value still in favor: While style leadership shifted toward growth stocks in Q2, leadership year to date still favors Value – particularly in the Mid Cap and Large Cap tiers. as measured by Russell Midcap Total Return and Russell 1000 Total Return indices respectively
Economic Summary
New Fed Chairman Kevin Warsh²:
Warsh reaffirmed support for the 2% inflation target
Fed removed explicit forward guidance from its statement signaling a move toward more a more data-dependent framework
Five New Fed Task forces studying: Fed Communications, Fed Balance Sheet, Data Collection and Analysis. Productivity and Jobs in the AI Era, and Inflation Frameworks.
Labor Market:
Unemployment down slightly, finishing the quarter at 4.2%
Employment conditions are stable, but inflation appears to be outpacing wages which could put pressure on consumer demand and savings rate
Inflation:
Inflation has remained above the Fed's 2% target for more than five years.
Recent inflation pressures partly reflect supply shocks and Middle East-related energy disruptions.
Short‑term inflation expectations have risen, largely due to surging energy prices tied to Middle East tensions.
Monetary Policy:
The Committee kept the federal funds rate unchanged at 3.50%–3.75%.
Rate cuts may occur, but timing and pace are uncertain and data-dependent
Outlook:
U.S. Economy slowing but not breaking
Inflation is improving, but remains above target
Lean into quality and Maintain discipline versus chasing winners
Prepare for higher volatility, lower return environment in equities
Intermediate-Term Bonds may serve as income and diversification tools
Sources:
[1] Source yCharts.com
[2] FOMC Press Conference Transcripts (June 17, 2026)
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