Clearview Portfolio Consulting June Market Recap
Key Points:
• The US economy expanded in the first half of the year with AI capital spending driving economic growth.
• Stocks across the globe are largely positive for the year with stronger performance in small cap and overseas markets.
• The cease fire in Iran saw energy prices drop, which may bring inflation back to pre-war levels.
The US economy saw a strong first half of 2026 as massive capital expenditures on the AI buildout are fueling growth and investment. The labor market has been healthy as the US economy added over 500,000 jobs this year while unemployment hovers at 4.2%. The Federal Reserve, under new Chairman Kevin Warsh, is in a difficult spot as tighter financial conditions are weighing on the housing market while inflation remains above their 2% target. Headline CPI (4.2%) was elevated by higher energy prices over the past three months from the conflict with Iran. However, oil has come back below $70/bbl as tensions in the Middle East have eased (for now). While prices at the pump for consumers have come down, oil prices will likely stay elevated as economies refill and expand their oil reserves. The returning supply from the Strait of Hormuz remains fragile and further disruptions are plausible.
Despite coming to terms with Iran, stocks were mixed for July. The Dow Jones Industrial Average gained 2.7% while the S&P500 fell 1%. Technology stocks dropped 3.3%, weighing heavily on the NASDAQ which lost 2.8% for the month. Small cap stocks continued to lead the market, with the Russell 2000 advancing 22.6% year-to-date. Value stocks outperformed growth stocks as industrials (+7.3%), healthcare (+6.6%) and financials (+4.4%) were the best sectors for the month. Outside the US, international developed markets were flat while emerging market stocks dropped 1.4%. Emerging markets are still the global leader, up 23.9% for the year.
The bond market has been relatively flat this year. While bond yields are the most attractive that we’ve seen in a decade, higher inflation from the war in Iran pushed bond yields up as investors required more return in exchange for potential loss of purchasing power (inflation). Stability in the region and lower sustained energy prices should bring inflation expectations back to pre-war levels. Higher short duration bond yields suggest the market went from pricing rate cuts to rate hikes as the Fed seeks to control price stability. Diversified investors have benefited from the strong surge in small cap and international names, outperforming the large growth part of the US market that dominated over the past few years. The second half of this year will likely be volatile as we head into mid-term elections.
Sources: Morningstar Direct, Wall Street Journal, CNBC, Guggenheim