Quarterly Update

Source: JPMorgan Guide to the Markets. Data as of June 30, 2026. Performance in %.

Backdrop

The second quarter of 2026 served as another reminder that markets often prove more resilient than headlines suggest. While investors navigated evolving trade policy, geopolitical developments, and shifting expectations for interest rates, global equity markets continued to advance as attention remained focused on healthy corporate earnings and an economy that has continued to slow without stalling.

One of the most encouraging developments during the quarter was the continued improvement in market breadth. While Mega-cap technology companies and artificial intelligence-related businesses remained important drivers of returns, leadership expanded across Financials, Industrials, Healthcare, Small-cap companies, and Value-oriented stocks. Broader participation is generally a healthy sign, suggesting market performance is becoming increasingly supported by a wider range of companies rather than concentrated in only a handful of names.

International equities continued to build on the strong momentum established in 2025. Attractive relative valuations, improving economic conditions in several developed markets, and a supportive currency backdrop contributed to another quarter of solid performance. This serves as an important reminder of the value of maintaining global diversification, particularly after many years of U.S. market leadership.

Fixed income also continued to fulfill its role within diversified portfolios. Although interest rates fluctuated throughout the quarter, higher starting yields remained an attractive source of income while helping cushion periods of equity market volatility. After several challenging years for bond investors, today’s yield environment once again allows high-quality fixed income to contribute meaningfully to both portfolio income and risk management.

Economic data released during the quarter continued to support the view that the U.S. economy is transitioning toward a more sustainable pace of growth rather than entering a broad-based contraction. Consumer spending remained resilient despite becoming more selective, business investment held steady, and corporate earnings generally exceeded expectations. While growth has moderated from the exceptionally strong pace experienced over the past several years, the overall backdrop remains consistent with a healthy expansion.

Inflation continued its gradual path lower, although progress remained uneven. Core inflation showed further signs of easing, while periodic increases in energy prices created temporary upward pressure on headline inflation. Encouragingly, longer-term inflation expectations remained relatively stable, allowing investors to look beyond short-term fluctuations and focus on the broader disinflationary trend.

The labor market also continued its orderly normalization. Hiring activity slowed modestly, job openings continued to move toward pre-pandemic levels, and wage growth moderated without a significant increase in unemployment. Rather than signaling economic weakness, these developments suggest a healthier balance between labor supply and demand after several years of an exceptionally tight employment market.

Taken together, these trends point toward an investment environment that is becoming increasingly balanced. Although uncertainty remains elevated, market performance has become less dependent on a narrow group of companies or a single economic outcome, reinforcing the benefits of maintaining diversified portfolios across asset classes, sectors, and regions.

Looking Ahead

As we move into the second half of 2026, the investment landscape appears considerably more balanced than it did a year ago. Inflation has moderated meaningfully from its peak, interest rates are no longer rising aggressively, corporate earnings remain healthy, and market leadership continues to broaden. While uncertainty surrounding monetary policy, fiscal developments, trade policy, and geopolitical events is unlikely to disappear, investors are once again placing greater emphasis on underlying economic fundamentals.

Valuations continue to warrant thoughtful attention. U.S. Large-cap equities remain priced above long-term historical averages, supported by expectations for continued earnings growth and the transformative potential of artificial intelligence. At the same time, opportunities remain compelling across Small-cap, Value, International equities, and select areas of fixed income where valuations and income potential compare favorably.

Fixed income remains well positioned within diversified portfolios. Today’s yield environment provides investors with meaningful income while also restoring the traditional role bonds have historically played as a source of stability during periods of market volatility. Should economic growth moderate further, high-quality bonds remain well positioned to provide additional portfolio resilience.

History reminds us that periods of market leadership inevitably evolve. Different sectors, regions, and investment styles take turns leading market returns over time, often when least expected. Maintaining broad diversification reduces dependence on any single investment theme while allowing portfolios to participate as new opportunities emerge.

Although short-term volatility will undoubtedly continue, our investment philosophy remains unchanged. Successful long-term investing is built not on predicting the next headline, but on maintaining a disciplined process through changing market environments. By focusing on high-quality investments, broad diversification, and prudent risk management, we believe investors are better positioned to achieve their long-term financial objectives.

During periods like these, we continue to emphasize the factors we can control. This includes systematically rebalancing portfolios as market leadership evolves, implementing tax-efficient strategies such as tax-loss harvesting where appropriate, and ensuring each portfolio remains aligned with its intended level of risk. These disciplines help position portfolios to navigate uncertainty while remaining focused on long-term opportunities.

As always, we encourage you to reach out whenever questions arise or market volatility creates uncertainty. We are here to help ensure your financial plan remains aligned with your goals, regardless of the headlines. While markets will inevitably experience periods of uncertainty, a disciplined investment strategy and a thoughtfully constructed financial plan remain the strongest foundations for long-term success.