June 29, 2026

“Freedom is never more than one generation away from extinction. It is not passed on genetically; it requires constant effort to fight for, protect, and pass on to future generations.”

Ronald Reagan

Happy 4th of July!

As we close the second quarter and celebrate the 250th birthday of our country I hope all are having a pride and joy summer and celebrate all our blessings living in this country. Here are the numbers from last week. The S&P 500 lost 1.95%, the Dow Jones Industrial Average gained +.65%, the Nasdaq was hit down 4.48%, Internationally the FTSE 100 won, up 1.39%, despite the MSCI-EAFE losing 1.8%. The 2-Year Treasury yield ended at 4.096%, and the 10-Year paid 4.37%.

So, what happened? The markets experienced a notable rotation and correction during the final full trading week of the first half of 2026. A sharp sell-off in technology and AI-related stocks weighed on the major benchmarks, while broader market breadth, defensive sectors, and value stocks provided resilience. The Dow Jones Industrial Average eked out a modest gain, but the S&P 500 and especially the Nasdaq Composite posted meaningful weekly losses.

Geopolitical easing (positive developments around US-Iran/Middle East tensions and improved shipping through the Strait of Hormuz) contributed to a sharp drop in oil prices, which helped ease some inflation concerns. The Federal Reserve’s mid-June decision to hold rates steady (with a hawkish-leaning communication tilt) continued to influence sentiment. Economic data showed a resilient underlying economy with strong manufacturing and services readings, solid income growth, and a stable labor market, though housing remained soft.

What won and what lost? Health Care: +7.21%, Real Estate: +3.74%, Utilities: +3.53% and Consumer Staples: +1.58%, hence the Dow had a positive week as defensive stocks rule the Dow. The losers, Information Technology: -5.33% Communication Services: -5.32%, Consumer Discretionary: -3.52% which is why Nasdaq got clobbered. Growth stocks significantly underperformed value, widening the YTD advantage for value-oriented strategies.

The Dow was the clear outperformer, benefiting from lower tech weighting and strength in industrials and defensives. The S&P 500 posted its second negative week in the past 13, snapping a strong winning streak. The Nasdaq suffered its second-largest weekly decline in the past year, driven by heavy losses in mega-cap tech and semiconductors. Small caps (Russell 2000) held up relatively well and remain the standout YTD performer, signaling broadening participation beyond mega-caps. Equal-weight S&P 500 reached new all-time highs, highlighting strong underlying breadth despite headline index weakness.

What’s going on in International Markets? Global equities were mostly lower in a risk-off tone, with emerging markets hit hardest in Europe: Mixed to modestly lower. STOXX Europe 600 hit record highs intraday before pulling back. Smaller tech exposure helped relative performance vs. the US, but industrials and banks lagged.in Asia no surprise as those markets were pressured by the global tech sell-off.

What about bonds? Bonds rallied. The Bloomberg U.S. Aggregate rose +0.40% for the week. Shorter-maturity Treasuries led as cooling inflation signals and shifting Fed expectations supported the market. High-yield credit was roughly flat.

Interest Rates? The Treasury market saw yields ease modestly overall, providing some relief after prior weeks’ volatility. The yield curve remained upward-sloping, with some bear-steepening dynamics earlier but stabilization later. Yields responded to mixed inflation signals, geopolitical developments (easing oil pressures), and expectations around Fed policy. The 10-year yield traded in a relatively tight range, supporting mortgage pricing stability. Fed outlook: Markets priced limited near-term cuts, keeping longer-term rates anchored higher.

The big news was in commodities, with Oil (WTI): -9.79% a sharp decline as geopolitical easing improved supply flow expectations through the Strait of Hormuz. Prices moved toward pre-disruption levels. Gold, as inflation fears ease, felt the pain off -2.16% and continued its recent losing streak (fourth straight weekly decline) as a stronger USD and higher-for-longer rate expectations weighed on the non-yielding metal. Silver was notably weaker. The US Dollar strengthened, supported by the Fed’s relatively hawkish tone despite some easing in rate-hike expectations priced by markets.

Key Economic Developments last week were positive with the data generally reinforced a picture of solid growth and resilient labor markets, with some softening in housing. PMIs showed strong expansion with manufacturing at 55.7 and Services at 51.3, huh? It means both in expansion territory and generally better than expected.

New Home Sales (May) came in weaker than expected at 580,000 (down Month over Month), reflecting high mortgage rates and affordability challenges.

Broader context included resilient capital spending trends and a core PCE reading around 3.4% annualized (sticky but not accelerating dramatically in the latest prints). Q1 GDP revisions were also supportive of growth.

Personal Income rose a solid +0.7% MoM, while housing continues to feel the weight of higher borrowing costs. Falling oil prices should provide some future relief on the inflation front.

Labor? The labor market remains healthy (low claims, steady unemployment in recent readings), Initial Jobless Claims remained low (~215k–221k range), signaling labor market stability.

What is the Outlook? The underlying US economy remains on solid footing, supported by strong corporate spending and a stable labor market, while lower oil prices offer a helpful offset to prior inflation pressures. Key themes to watch in coming weeks include follow-through on the rotation (will value/defensives/small caps sustain leadership?), We think so. the impact of lower energy prices on inflation. We believe will corral inflation, and consumer spending, and any updates on Fed communications or geopolitical developments.

Finally, the mortgage market, Mortgage rates were relatively stable to slightly mixed last week, hovering in the mid-6% range for 30-year loans amid modest Treasury yield movements and ongoing economic data. Freddie Mac Weekly Average (as of June 25): 30-year fixed: 6.49% (up 2 bps from prior week) 15-year fixed: 5.84% (up modestly). Rates remained elevated compared to early 2026 lows but showed resilience, with some easing toward the end of the week on softer yield moves. Refinance activity was active in pockets where borrowers could lock in improvements. Overall, the mortgage and bond markets were calmer than in prior volatile weeks, with slight rate relief by week’s end.

This week is a light, holiday-shortened trading week (markets closed Friday, July 4 for Independence Day). Expect lower volume, potential volatility around key data, and a focus on positioning for July. Markets will digest ongoing corporate results and AI spending narratives. Strong earnings growth (S&P 500 projected 25% for 2026) supports bulls, but concentration risks and valuation concerns linger.

On more thing, recent Federal Reserve signals (steady rates with possible 2026 hike) keep yields in focus. No FOMC meeting, but speeches or comments could move markets.

Enjoy your 4th of July holiday!

Mike