The mid-point of 2026 has arrived, and the first half proved an eventful one for investors. While markets climbed to new all-time highs, there was no shortage of newsworthy events and market volatility. While we would argue this is status quo for any long-term investor, it’s worth taking a closer look at what drove markets in the first half and what that could mean looking forward.
On the positive side, markets hit all-time highs driven by double-digit corporate earnings that were broad based across market sectors. This is a departure from the mainly technology and AI driven growth of the past few years. In fact, the so-called magnificent 7 stocks were down almost 2% on an equal-weighted total return basis year-to-date (through 6/30/2026). The fact that these stocks make up more than 30% of the S&P 500 makes the index’s 10% first half total return that much more surprising.
That performance, however, did not happen in a straight line. The war with Iran pushed oil prices to multi-year highs, which flowed through to a May CPI (inflation) increase of 4.2%, the highest in several years. This caused expectations for the Federal Reserve to cut rates coming into the year, to shift to a potential increase as employment trends remain solid. This also led to significant market swings in the first half with the S&P 500 total return down by over 4% in the first quarter, but up by 15% in the second quarter. This reinforces the importance of staying invested as markets have a long history of growing through periods of uncertainty.
Coming into the year, we positioned stock allocations for a broadening away from the large-cap, U.S. growth stock driven performance of recent years. In particular, we expected value, small-cap and international stocks to perform well. So far, that has been the case with all three categories outperforming the S&P 500 year-to-date. History has shown that sometimes this outperformance can happen quickly and is very difficult (if not impossible) to time. For example, the Russell 2000 Small Cap index has outperformed the S&P 500 by over 12% year-to-date and almost 19% over the past year on a total return basis. While no one can predict with certainty if this will continue, it highlights the importance of a well-diversified portfolio to take advantage of these shifts.
Looking forward, we remain positioned for these trends to continue. We do expect to see continued volatility given uncertainty around the Iran War, the upcoming mid-term election news cycle and constant attention on Fed interest rate decisions. However, a solid economic outlook and strong corporate earnings expectations should provide some level of support. While we don’t believe it’s time to take additional risk and reach for return, participation and discipline remain key.
Fixed income performance has been positive but partially affected by rising interest rates. Most categories saw low single-digit returns, as higher starting coupon rates offset the interest rate increases. Looking forward, we continue to like short to intermediate-term bonds as inflation concerns keep longer-term rates at risk of moving higher. That said, solid starting coupon rates should allow bonds to steady portfolio performance if there is a pullback in stocks.
If the first half of 2026 is any indication, we continue to expect the unexpected. There will always be a headline or event that no one sees coming. However, we believe taking a long-term view and tuning out the noise remains a very effective (and profitable) approach to investing. Please contact us if Parable Wealth Advisors can help you and your family with your investment management and financial planning goals.
This content is for information purposes only.
All performance data is as of 6/30/2026. Past performance is no guarantee of future results.
See our Disclosure page for additional important information.
The mid-point of 2026 has arrived, and the first half proved an eventful one for investors. While markets climbed to new all-time highs, there was no shortage of newsworthy events and market volatility. While we would argue this is status quo for any long-term investor, it’s worth taking a closer look at what drove markets in the first half and what that could mean looking forward.
On the positive side, markets hit all-time highs driven by double-digit corporate earnings that were broad based across market sectors. This is a departure from the mainly technology and AI driven growth of the past few years. In fact, the so-called magnificent 7 stocks were down almost 2% on an equal-weighted total return basis year-to-date (through 6/30/2026). The fact that these stocks make up more than 30% of the S&P 500 makes the index’s 10% first half total return that much more surprising.
That performance, however, did not happen in a straight line. The war with Iran pushed oil prices to multi-year highs, which flowed through to a May CPI (inflation) increase of 4.2%, the highest in several years. This caused expectations for the Federal Reserve to cut rates coming into the year, to shift to a potential increase as employment trends remain solid. This also led to significant market swings in the first half with the S&P 500 total return down by over 4% in the first quarter, but up by 15% in the second quarter. This reinforces the importance of staying invested as markets have a long history of growing through periods of uncertainty.
Coming into the year, we positioned stock allocations for a broadening away from the large-cap, U.S. growth stock driven performance of recent years. In particular, we expected value, small-cap and international stocks to perform well. So far, that has been the case with all three categories outperforming the S&P 500 year-to-date. History has shown that sometimes this outperformance can happen quickly and is very difficult (if not impossible) to time. For example, the Russell 2000 Small Cap index has outperformed the S&P 500 by over 12% year-to-date and almost 19% over the past year on a total return basis. While no one can predict with certainty if this will continue, it highlights the importance of a well-diversified portfolio to take advantage of these shifts.
Looking forward, we remain positioned for these trends to continue. We do expect to see continued volatility given uncertainty around the Iran War, the upcoming mid-term election news cycle and constant attention on Fed interest rate decisions. However, a solid economic outlook and strong corporate earnings expectations should provide some level of support. While we don’t believe it’s time to take additional risk and reach for return, participation and discipline remain key.
Fixed income performance has been positive but partially affected by rising interest rates. Most categories saw low single-digit returns, as higher starting coupon rates offset the interest rate increases. Looking forward, we continue to like short to intermediate-term bonds as inflation concerns keep longer-term rates at risk of moving higher. That said, solid starting coupon rates should allow bonds to steady portfolio performance if there is a pullback in stocks.
If the first half of 2026 is any indication, we continue to expect the unexpected. There will always be a headline or event that no one sees coming. However, we believe taking a long-term view and tuning out the noise remains a very effective (and profitable) approach to investing. Please contact us if Parable Wealth Advisors can help you and your family with your investment management and financial planning goals.
This content is for information purposes only.
All performance data is as of 6/30/2026. Past performance is no guarantee of future results.
See our Disclosure page for additional important information.
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