By the Investment Committee at Rigden Capital Strategies
We are officially halfway through 2026, and the second quarter brought a strong market rally despite ongoing geopolitical uncertainty, elevated interest rates, and renewed concerns around inflation.
Markets moved higher as corporate earnings remained resilient, enthusiasm around artificial intelligence continued to support technology and infrastructure-related companies, and the U.S. economy continued to expand at a solid pace.
When markets move quickly, it can be easy to get distracted by daily headlines. Below, we review some of the key factors that shaped market performance over the last three months and what we are watching as we move into the second half of the year.
How Major Markets Performed in Q2 2026
Most major areas of the market posted gains during the quarter, with technology and growth-oriented companies leading the way.
S&P 500 — Large U.S. Companies
The S&P 500 rose approximately 15% during the second quarter, marking one of its strongest quarterly advances in several years. The rally was supported by strong earnings, investor enthusiasm around artificial intelligence, and continued confidence in the resilience of the U.S. economy.
Dow Jones Industrial Average — Blue Chip Companies
The Dow also moved higher during the quarter, though its gains were more measured than the technology-heavy indexes. As the quarter progressed, market participation broadened beyond large technology companies, with industrials, financials, and other traditional sectors contributing to overall performance.
Nasdaq Composite — Technology and Growth Companies
The Nasdaq posted strong gains as investors continued to favor companies tied to artificial intelligence, semiconductors, cloud computing, and data-center infrastructure. While enthusiasm remains elevated, investors also became more selective, rewarding companies with clearer revenue growth and profitability tied to AI adoption.
Russell 2000 — Small U.S. Companies
Small-cap stocks also participated in the rally as economic growth remained intact. However, higher borrowing costs continue to create challenges for smaller companies, particularly those that rely more heavily on debt financing.
Three Trends That Shaped the Quarter
1. AI Enthusiasm Became More Selective
Earlier in the AI cycle, many companies benefited from simply being associated with the theme. This quarter, investors appeared to focus more carefully on companies showing tangible results.
Capital continued to flow toward businesses involved in the physical and digital infrastructure behind AI, including semiconductors, data centers, power, cloud services, and related technology platforms. At the same time, investors became more discerning about separating companies with measurable AI-driven growth from those using AI primarily as a marketing narrative.
AI remains an important long-term theme, but expectations are high. Companies will need to continue translating investment and innovation into sustainable earnings growth.
2. Interest Rates Remained Elevated
At the start of the year, many investors expected the Federal Reserve to move more quickly toward rate cuts. Instead, inflation remained above the Fed’s long-term target while the labor market and broader economy continued to hold up.
That combination gave the Fed less urgency to reduce rates. While higher interest rates can create pressure for both stocks and bonds, equity markets were supported during the quarter by stronger earnings growth and continued confidence in the economy.
Looking ahead, interest-rate policy remains a key variable. If inflation continues to moderate, the Fed may have more flexibility. If inflation proves more persistent, rates could remain higher for longer, or the Fed could consider additional tightening.
3. Energy and Geopolitical Risks Remained Important
Geopolitical tensions in the Middle East contributed to volatility in energy prices during the quarter. Oil-price spikes briefly raised concerns that inflation pressures could reaccelerate, especially if supply disruptions became more severe.
Ceasefire headlines and diplomatic efforts helped ease some of those fears at times, but the situation remains fluid. A renewed increase in oil prices could put upward pressure on inflation expectations and complicate the Fed’s interest-rate decisions.
For investors, this is a reminder that geopolitical events can affect markets quickly, but portfolios should not be built around short-term headlines alone.
Looking Ahead to the Second Half of 2026
As we move into the second half of the year, the global economy continues to expand, with the U.S. remaining one of the stronger major economies. Corporate profits have been a key source of support for the market, and investor confidence has improved compared to earlier in the year.
However, stocks are no longer inexpensive after the strong rally. Higher valuations mean companies may need to continue delivering solid earnings growth to justify current prices. Any disappointment in profits, inflation data, interest-rate expectations, or geopolitical developments could lead to renewed volatility.
The bond market also requires careful attention. Elevated government debt, inflation uncertainty, and changing Fed expectations can all affect interest rates and bond prices. In this environment, bond positioning should be intentional rather than automatic.
We expect the Fed to remain patient and data-dependent. That means the stock market may need to rely more on earnings growth and economic resilience than on the expectation of near-term rate cuts or “cheap money.”
Our Strategy Moving Forward
Our approach has not changed: we remain focused on quality, diversification, and alignment with each client’s long-term financial plan.
In a market near record highs, we believe it is important to be selective. We continue to focus on companies and investment strategies supported by strong balance sheets, durable cash flow, competitive advantages, and the ability to operate in a higher-rate environment.
At the same time, no investment style works in every market cycle. Quality companies can still decline in value, diversification does not guarantee a profit or protect against loss, and markets can move quickly when expectations change.
That is why we believe the most important question is not simply, “What did the market do this quarter?” but rather, “Is your plan still aligned with your goals, risk tolerance, income needs, tax picture, and time horizon?”
Behind every number on a statement is a real-world goal: retirement security, family legacy, charitable giving, financial independence, or the freedom to spend time the way you choose.
Our role is to help you navigate changing markets with discipline, perspective, and a plan designed around what matters most to you.
About Rigden Capital Strategies
Rigden Capital Strategies was founded on a simple belief: financial advice should be personal, transparent, and centered around your goals—not built on generic models or product-driven sales.
With decades of combined industry experience, our planning process is grounded in three core values: value, integrity, and progress.
As a fee-only fiduciary, we provide personalized, goals-based wealth planning services designed to adapt with your life. Our services include investment management, retirement planning, tax planning, and estate coordination. We use a mix of active and passive strategies to help clients navigate market changes with clarity and confidence.
We believe in building real relationships and delivering clear, actionable strategies focused on long-term planning and aligned with each client’s objectives.
Your goals, our strategies. Together, let’s make your goals happen.
Disclosure
This commentary is provided for informational and educational purposes only and should not be construed as individualized investment advice or a recommendation to buy or sell any specific security, sector, or investment strategy. Market and economic views are as of the date of publication and may change without notice. Forward-looking statements are inherently uncertain, and actual results may differ materially from expectations.
Index returns are unmanaged, do not reflect fees or expenses, and investors cannot invest directly in an index. Any index return figures should be verified against a reliable market-data source as of the stated period end. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal. Diversification and asset allocation do not guarantee a profit or protect against loss in declining markets.
Rigden Capital Strategies is a registered investment adviser. Registration does not imply a certain level of skill or training.