Quarterly Market Data - June 2026

Equities were strong; hard assets were mixed

Asset Class Returns

Major Asset Class Returns - 3 Months Ending June 30, 2026

• Equities provided robust returns in Q2, with leadership transitioning away from the mega-cap index heavyweights. Smaller capitalized outfits, particularly those providing specialized components and infrastructure needs within the AI supply chain, offered superior returns.

• U.S. Small Caps led Q2 with a 21.15% return for the iShares Russell 2000 ETF. Emerging Market stocks were a close second, posting a 20.46% return.

• International Developed markets did not participate as much in the equity boom as the other equity classes.

• The Commodity complex underwent a sharp reversal as tensions in the Middle East eased, bringing hope for normalization in Oil markets and restored transit through the Strait of Hormuz. Oil declined by over 30% in Q2 and Gold's quarterly depreciation was the largest in over a decade.

• Domestic Real Estate had a strong quarter. The iShares Core U.S. REIT ETF rose 12.27% in the second quarter.

• Fixed Income was essentially flat. Rising interest rates tempered price appreciation (more below).

Major Asset Class Returns - 12 Months Ending June 30, 2026

• All eight asset classes have a positive traling twelve-month return.

• Like the quarter, Emerging Markets (+43.8%) and U.S. Small Caps (+40.3%) are the top returning asset classes over the past twelve months.

• The drop in Commodities during the quarter makes it the third-best performing asset class over the past year. Despite Q2's 11% decline, Commodities are up 29.8% in the last year.

U.S. Index REturns with Growth & Value Styles

• Growth outperformed Value within each capitalization range. Small Caps dominated their large and mid-cap peers. Small Cap Value, which underperformed Growth and the broad Russell 2000, still beat out all other styles.

• Growth's performance was underpinned by exceptional returns in the Information Technology sector - specifically hardware names in the semiconductor and memory spaces.

• Demand moved away from the major "hyper-scalers" and into shares with "hard-to-replicate" physical assets.

• This rotation reflected a deepening skepticism toward asset-light software firms, where AI is actively compressing margins and threatening previous valuations. Capital-intensive business were the beneficiaries of the physical layer tech boom in the quarter.

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Interest Rates

• Fixed Income markets underwent a profound change following the appointment of Kevin Warsh as the new chair of the Federal Reserve. A decisive upward shift was observed across the entire yield curve, except for the front-end 1M maturity, which declined by four basis points.

• Quarter-end interest rate expectations were a stark contrast to the start of the year when the consensus was looking for rate cuts by year end.

• The 2Y/10Y spread is now 0.30%. The spread narrowed by over 20 basis points from last quarter and last June.

• The smaller spread resulted from the 2YR (+35 basis points) increasing more than the 10YR (+14 bps).

Disclaimer - this is not to be construed as investment advice or a recommendation to buy or sell any security. This is not meant to be indicative of any specific portfolio returns. Please see full disclosure on main blog page.