Quarterly Market Update – Mid-Year 2026

Second Quarter Review

The second quarter demonstrated the resilience that has characterized much of the market over the past year. Despite ongoing geopolitical tensions, elevated interest rates, and persistent inflation concerns, U.S. equities continued to advance as investors focused on strong corporate earnings and the long-term growth potential of artificial intelligence and technology-related investments. By the end of the quarter, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite had all produced solid year-to-date gains, while smaller company stocks also began to participate more broadly in the market rally.

While market leadership has broadened somewhat, earnings growth remains the primary driver of stock prices. Companies have generally demonstrated an ability to maintain profitability despite higher borrowing costs and a slower economic environment. Investors have also welcomed signs that inflation has moderated from its peak, although it remains above the Federal Reserve’s long-term target.

Outlook for the Remainder of 2026

Looking ahead, we remain cautiously optimistic. The U.S. economy continues to show resilience, supported by healthy corporate balance sheets, steady employment, and continued consumer spending. While economic growth is expected to moderate somewhat during the second half of the year, most economists do not currently anticipate a severe recession.

The Federal Reserve remains a key variable. Although inflation has improved, policymakers are expected to remain data-dependent before making significant changes to interest rates. Any unexpected increase in inflation or deterioration in economic data could create periods of heightened market volatility.

Corporate earnings will likely determine whether stocks can continue moving higher. Current expectations call for another strong earnings season, but valuations in certain sectors, particularly large-cap technology, leave less room for disappointment. We expect leadership to continue broadening beyond the largest technology companies, creating opportunities across sectors and market capitalizations.

As always, short-term market movements are impossible to predict with certainty. History reminds us that periods of volatility are a normal part of investing and often create opportunities for disciplined, long-term investors. Rather than reacting to headlines, we believe maintaining a diversified portfolio aligned with your financial goals remains the most effective strategy.

Thank you for your continued confidence. As always, please contact us if your financial goals or personal circumstances have changed or if you would like to review your investment strategy.

Jason M. Vavra, CPA, PFS

Email: jvavra@vcm-wealth.com Website: www.vcm-wealth.com Twitter: @VCMWealth

Disclaimer

The information contained herein is not considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecasted in this report will be realized or achieved. Past performance is no guarantee of future results.

Review

The third quarter of 2025 was broadly strong for financial markets. Major equity indices hit new highs, driven by strong earnings, the ongoing artificial-intelligence boom, and growing expectations of interest-rate cuts by the Federal Reserve. The S&P 500 continued to hit new highs due primarily to strong corporate earnings reports.  Economic growth was moderate despite the uncertainty from tariffs and US trade policy.

Outlook

For the remainder of the year, we are optimistic that the labor market and corporate earnings will continue to support a favorable equity market. In addition, if the Federal Reserve continues to ease interest rates, it could help lower mortgage rates and be a catalyst to equities. Economic forecasts seem to suggest that growth will start to moderate. Risks such as elevated valuations, tariff/trade pressures, and geopolitical uncertainty could contribute to a slowdown. Overall, we believe the equity markets should continue to see gains into next year, but there is an increased risk of volatility or correction due to the high valuations and uncertainties mentioned.

As always, I stress that in this ever-changing political and economic environment, sensible diversification is the key to weathering market uncertainties.

Jason M. Vavra, CPA, PFS

Email: jvavra@vcm-wealth.com Website: www.vcm-wealth.com Twitter: @VCMWealth

Disclaimer

The information contained herein is not considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecasted in this report will be realized or achieved. Past performance is no guarantee of future results.

Review

The first half of 2025 was marked by dramatic volatility in U.S. stocks. A steep spring sell-off triggered by sweeping tariff announcements plunged the S&P 500 near correction territory in early April. Subsequently a rapid rebound driven by tariff rollbacks, resilient corporate earnings, and solid economic data pushed the index to record highs by late June. The result was mid‑year gains of roughly 6%. Strong corporate earnings, sustained consumer spending, and anticipation of Fed rate cuts contributed to a cautiously optimistic second half outlook, with strategists expecting further modest gains but warning volatility could persist based on renewed trade tensions.

Outlook

Equity markets have rebounded after an early-year selloff primarily driven by strong earnings reports. However, valuations remain high and market gains are concentrated in a few large-cap names. With the S&P 500 trading at elevated multiples, further gains may be limited unless earnings continue to surprise to the upside. Risks still remain from geopolitical tensions, inflation surprises, and interest rate uncertainty. Despite the S&P 500 outperforming almost every major asset class over the last few years, we are stressing our commitment to diversification to help manage volatility through year-end.

For the balance of 2025 the global economy is expected to continue slowing, with U.S. growth projected around 1.5–2.0% as higher interest rates and lingering inflation weigh on consumers and businesses. The Federal Reserve remains cautious, holding rates steady amid sticky inflation and uncertainty from ongoing tariff policies. While a recession seems unlikely, the threat of rising costs, tighter credit, and global trade disruptions could limit upside momentum. Consumer spending is beginning to cool, and business investment has softened, suggesting the economy is settling into a slower but stable growth phase.

As always, I stress that in this ever-changing political and economic environment, sensible diversification is the key to weathering market uncertainties.

Jason M. Vavra, CPA, PFS

Email: jvavra@vcm-wealth.com Website: www.vcm-wealth.com Twitter: @VCMWealth

Disclaimer

The information contained herein is not considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecasted in this report will be realized or achieved. Past performance is no guarantee of future results.

Review

As of early April 2025, the U.S. stock market has faced notable challenges. The S&P 500 index declined by approximately 4.6% in the first quarter, marking its poorest performance since 2022. In contrast, international markets like Germany and Hong Kong experienced double-digit gains during the same period.

Continue reading “April 2025 Review & Outlook” →

Review

In the second quarter of 2024, the US economy exhibited moderate growth, driven by consumer spending and a resilient labor market. Despite inflationary pressures easing slightly, the Federal Reserve maintained a cautious stance, keeping interest rates stable to balance growth and price stability. The housing market showed signs of recovery with increased home sales, while manufacturing remained subdued due to ongoing supply chain challenges. Corporate earnings were generally positive, but some sectors, particularly technology, faced headwinds from regulatory scrutiny and geopolitical tensions. Continue reading “July 2024 Review & Outlook” →

Review

In 2023, the stock market experienced robust performance with major indices reaching record highs fueled by strong corporate earnings, supportive fiscal policies, and optimism surrounding economic recovery from the pandemic. Despite initial concerns over inflation and supply chain disruptions, the economy exhibited resilience, marked by steady job growth, rising consumer spending, and accommodative monetary policies. Geopolitical tensions and sporadic COVID-19 outbreaks posed intermittent challenges, but overall, 2023 showcased a blend of adaptability and cautious optimism in navigating uncertainties, setting the stage for a dynamic economic landscape in the years ahead. Continue reading “January 2024 Review & Outlook” →

Review

Uncertainty over Federal Reserve policy and the potential effects on the economy weighed negatively on the markets during the third quarter of 2023. Although July continued the strength we saw during the second quarter, the S&P 500 ended the third quarter down almost 4%.

There were silver linings as corporate earnings were stronger than expected and inflation was on the decline. However, the rhetoric from Federal Reserve officials was they expected inflation to stay above their 2% target longer than anticipated. Thus, spreading concern to the market rates would remain higher for longer and more interest rate hikes may be warranted.

Outlook

By the fourth quarter of the year, we had expected inflation to be lower and Federal Reserve policy to begin shifting towards an easing cycle. That has not happened as interest rates have continued to rise in all areas and the yield curve is still inverted. With interest rates still higher, there is concern the economic data will begin to weaken and the hope of a “soft landing” has been put into some doubt.

The consumer has remained resilient, but there is uncertainty as to whether higher interest rates will begin to crack consumer spending and increase the odds of a recession. October is historically one of the worst months of the year and has held true to that pattern.

We believe the Fed is done raising rates and any confirmation of their guidance to that regard would likely lead to a drop in US treasury bond and mortgage rates. If that scenario holds true, investors will begin to add to their bond allocations as an alternative to the large amounts of money sitting in money market and short-term fixed income investments.

Although the likelihood of new all-time highs for the equity markets in 2023 seems unlikely, we feel as though the markets are in an over-sold condition and expect to see positive returns heading into year-end.

As always, I stress that in this ever-changing political and economic environment, sensible diversification is the key to weathering market uncertainties.

Jason M. Vavra, CPA, PFS

Email: jvavra@vcm-wealth.com Website: www.vcm-wealth.com Twitter: @VavCap

Disclaimer

The information contained herein is not considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecasted in this report will be realized or achieved. Past performance is no guarantee of future results.

Review

Looking back to our beginning of the year outlook, we commented that only four times in the almost 100-year existence of the S&P 500 has the index been down two or more years in a row. Thus, it is no surprise to us that the S&P rose 16% to end the first half of 2023. A combination of a resilient US economy and foreseen ending of the Federal Reserve interest rate hikes was enough for the market to take a more “risk on” approach as well as a dramatic shift from value to growth stocks. The shift to growth from value is easily demonstrated with the NASDAQ, a more tech heavy index, rising 32% for the first half, while the Dow Jones Industrial Average, a more value-oriented index, up only 4% in the same timeframe. Continue reading “July 2023 Review & Outlook” →

Review

In our January 2022 newsletter, we anticipated inflation, and the Federal Reserve would dominate the headlines. How true that turned out to be. 2022 saw inflation hitting 40-year highs and the Federal Reserve raising interest rates by 4.25%. For only the third time since 1990, both stock and bond markets declined the same year (2015 & 2018). There was nowhere to hide with the Dow Jones, S&P 500 and Nasdaq down roughly 7%, 18% and 32% respectively and bond indexes putting in their worst year in history. Continue reading “January 2023 Review & Outlook” →

Review

The second quarter ended with the worst first half of the year performance since 1970 with the S&P 500 down over 20%. Continuing concerns over inflation, Federal Reserve rate hikes and the war in Ukraine increased the probability of a recession.

As the investment community searches for signs the market has bottomed, it is good to note historical similarities. There have been 12 bear markets (20% or more decline in the S&P 500) since World War II. The average length of those has been 10 months, with an average decline of around 30%. Within half of those bear markets, the bottom was put in within two months of piercing the 20% decline and the average gain for the 6 month and 12 month periods after was 7% and 18%, respectively. So, from a historical perspective, large declines are typically short-lived, and recoveries tend to be just as sharp. Continue reading “July 2022 Review & Outlook” →