2026 Q2 Market Review

By Schultz Collins Investment Counsel on July 31, 2026

Global equity markets produced above average results in the second quarter of 2026 as investors appear to look beyond the earlier geopolitical uncertainty and concerns surrounding higher than desired inflation and interest rates. The MSCI All Country World Index, an index of developed and emerging market countries comprised of large cap and mid-sized stocks, rose 15.06% for the quarter and 24.16% for the trailing 12 months.

Although the S&P 500 delivered higher than average quarterly returns of approximately 15.20%, the most notable development was the broadening of market leadership beyond the top 10 largest and most widely discussed stocks in the U.S. The index seemed to benefit from a positive corporate earnings season and continued investment in technology infrastructure. The positive sentiment in the quarter allowed the S&P 500 to return 22.32% for the trailing 12-month period.

U.S. small-cap stocks outperformed large company stocks in quarter. The Russell 2000 gained 21.49% during the period and 40.8% over the trailing 12 months. This represented a meaningful reversal from the extended period in which smaller companies had lagged the largest capitalization-weighted stocks.

Improving earnings expectations, and increasingly positive investor sentiment toward smaller technology, industrial, financial and healthcare companies seem to help drive investors to this section of the stock market.

U.S. real estate securities also delivered double-digit results for the quarter and for the last 12 months. For the quarter, the Dow Jones U.S. Select REIT Index rose 12.37% and 22.59% for the last 12 months. The REIT market appears surprisingly resilient in the face of higher-than-expected interest rates. The investor attraction is likely due to improved results in the apartment and industrial sector, plus continued optimism in the widely discussed data center buildout occurring around the country. 

Developed international markets also participated in the global stock market advance but not to the degree seen in other markets. The MSCI EAFE Index, which includes developed markets in Europe, Japan, Australia and other regions outside North America, returned 11.08% during the second quarter and 20.8% over the trailing year. Some analysts appear to believe international developed market stocks are benefiting from greater prospects for higher corporate earnings leading to increased investor interests. Nevertheless, developed international stocks trailed both the other major U.S. indices and emerging markets during the quarter.

Emerging-market equities led all categories in the quarter and trailing 1-year period. The MSCI Emerging Markets Index advanced 24.15% for the quarter and 44.18% over the trailing 12 months. Much of this strength came from Asian technology and semiconductor companies which have become increasingly important participants in the momentum behind global artificial-intelligence development.

Overall, the second quarter demonstrated the benefits of maintaining diversified stock exposure across company size and geographic regions. The S&P 500 continued to produce above average results, but portfolios that included U.S. small-cap, and emerging-market stocks benefits the most.

Fixed income markets also delivered positive returns for the quarter, albeit modest. The market saw the U.S. Treasury yield-curve shift modestly higher in the quarter as investors reacted to stubborn and higher than expected inflation. While oil prices eased over the period, positive GDP results may provide enough evidence that the Fed will struggle to justify easing monetary policy.

An indicator of bond investor sentiment related to U.S. growth, future inflation as well as a benchmark for lending rates, is the yield on the 10-year Treasury Note. The Treasury yield finished modestly higher for the quarter, rising from 4.30% to 4.44%. The Treasury yield started 2026 at 4.20%.

The Bloomberg U.S. Aggregate Bond Index, the broad benchmark for investment-grade taxable U.S. bonds, gained 0.67% during the second quarter and approximately 3.79% over the trailing 12 months.

Investment-grade corporate bonds outperformed the broad U.S. bond market possibly due to resilient corporate earnings and investor demand for high-quality income. The ICE B of A U.S. Corporate 5–10 Year Index returned approximately 1.25% during the second quarter and 4.64% over the trailing year.

According to the Council of Foreign Relations, global monetary policy remained modestly tight with Japan, Australia and much of Europe leading the way. Despite mildly tight monetary policy, global fixed income markets were still able to produce modestly positive returns for the quarter. The FTSE World Government Bond Index (WGBI), which measures investment-grade bonds across developed markets in U.S. dollars terms, returned approximately 0.68% during the second quarter but the index is still in modestly negative territory at -0.11% over the trailing 12 months.

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