NWP Quarterly Insights | Q2 2026
Earnings, a U.S./Iran Ceasefire, and a Strong Economy Send Stocks to New Highs
Markets staged an impressive rebound in the second quarter. A surge in tech-related corporate earnings, combined with rising hopes for a U.S./Iran ceasefire, pushed stocks sharply higher and carried the major U.S. averages to new all-time highs.
The good news arrived almost immediately. On April 7th, President Trump announced a two-week ceasefire with Iran, ending direct hostilities between the two countries. That news — and the drop in oil prices that followed — helped stocks recoup the geopolitically driven declines of March. But it was really a stellar first-quarter earnings season that fueled the April rally. Annual earnings growth surged to roughly 15% for the S&P 500 following the Q1 results, nearly double the long-term average. AI-linked tech companies posted some of the strongest numbers on booming data center demand, but the strength was broad: more than 80% of the companies reporting during the Q1 season beat Wall Street estimates. That combination — AI-led earnings growth and the ceasefire — powered the rebound in stocks.
Market gains accelerated in May, driven by the same two forces: strong earnings and expectations for a durable U.S./Iran ceasefire. The May reporting season was lighter than April's but no less impressive. Nvidia, Intel, Dell, Snowflake, and others posted results that reinforced just how massive the demand for AI infrastructure has become. And it wasn't only tech — Walmart delivered solid results that pushed back on fears higher prices were denting consumer spending. Surging demand for data center components like memory and semiconductors drove outsized gains in certain tech stocks through month-end, and the S&P 500 notched multiple new all-time highs. On the geopolitical front, there was still no formal ceasefire agreement, but markets were confident there would be no material escalation either — so the absence of a signed deal didn't weigh on stocks.
The rally continued into early June, helped first by reported progress on a U.S./Iran ceasefire agreement, which President Trump and Iranian leaders signed in mid-June. Anticipation for the SpaceX IPO — the largest in history — gave the tech sector and AI-linked investments another lift, and the S&P 500 hit yet another all-time high mid-month. Then came a surprise from new Federal Reserve Chairman Kevin Warsh. The Fed left rates unchanged in June, as expected, but the meeting statement and Warsh's press conference struck investors as hawkish, and the odds of a rate hike later this year jumped. That shift from prior expectations sparked some volatility. Stocks proved resilient, though: with oil falling back to pre-war levels, investors came to believe the current inflation spike will prove temporary.
In sum, the market completed an impressive rebound from the steep declines of late March. Much-better-than-expected earnings growth — led primarily by AI-linked tech — along with solid economic activity and the signing of a U.S./Iran ceasefire sent the S&P 500 to new all-time highs.
Second Quarter Performance Review
The gains in the S&P 500 were broad in the second quarter, but the fingerprints of the AI boom were everywhere you looked.
By market capitalization, small caps outperformed large caps — a product of strong economic growth (which tends to benefit smaller-company earnings disproportionately), falling oil prices, and the trickle-down of AI optimism toward small-cap tech and AI infrastructure names.
By investment style, growth outpaced value — though by less than you might expect given the strength in AI-linked tech. Growth benefited from the surge in AI infrastructure stocks like memory and semiconductor makers, while value got a lift from industrials.
At the sector level, 10 of the 11 S&P 500 sectors finished the quarter in positive territory. Technology was the best performer by a wide margin, powered by huge rallies in memory stocks such as Micron and SanDisk and continued gains across semiconductors. Industrials also logged strong gains, positioned to benefit from AI data center construction and rising defense spending. Real estate rounded out the leaders on anticipated data center demand, as several tech and AI-linked REITs posted very strong returns.
Among the laggards, energy was the only sector to finish negative, pressured by falling oil prices that had started April sharply higher before the ceasefire process began. Communication services was the other clear laggard, managing only a small gain as weakness among legacy internet and mobile providers weighed on the group — a reminder, underscored by the SpaceX IPO, that Starlink and other satellite internet providers are now legitimate threats to those established business models.
| US Equity Indexes | Q2 Return | YTD |
|---|---|---|
| S&P 500 | 18.57% | 10.21% |
| DJ Industrial Average | 16.20% | 9.76% |
| NASDAQ 100 | 32.12% | 20.31% |
| S&P MidCap 400 | 17.76% | 17.34% |
| Russell 2000 | 25.69% | 22.57% |
Source: YCharts
International markets were also shaped by tech and AI. Emerging markets handily outperformed the S&P 500, thanks to an extreme rally in South Korean shares on the memory boom. Foreign developed markets, by contrast, lagged the S&P 500, receiving little of the AI-related boost.
| International Equity Indexes | Q2 Return | YTD |
|---|---|---|
| MSCI EAFE TR USD (Foreign Developed) | 11.55% | 9.84% |
| MSCI EM TR USD (Emerging Markets) | 22.84% | 24.02% |
| MSCI ACWI Ex USA TR USD (Foreign Dev & EM) | 14.83% | 14.01% |
Source: YCharts
Commodities declined moderately, driven mainly by the drop in oil on reduced geopolitical tension. Oil was volatile but ended the quarter solidly lower, helped by increased ship transit through the Strait of Hormuz and the ceasefire agreement. Gold also fell, on the same easing of geopolitical concerns and a stronger U.S. dollar, which hit a one-year high in June as rate-hike expectations rose.
| Commodity Indexes | Q2 Return | YTD |
|---|---|---|
| S&P GSCI (Broad-Based Commodities) | -11.84% | 24.09% |
| S&P GSCI Crude Oil | -31.90% | 21.97% |
| GLD Gold Price | -11.03% | -7.27% |
Source: YCharts / Koyfin.com
In fixed income, the leading benchmark for bonds — the Bloomberg U.S. Aggregate Bond Index — posted a modest positive return, as falling commodity prices eased inflation concerns.
Digging deeper, shorter-duration bonds again outperformed longer-duration issues, as some inflation statistics hit multi-year highs and ended the quarter well above the Fed's 2.0% target. In corporate credit, both investment-grade and high-yield bonds posted solidly positive returns, with high-yield outperforming — resilient growth and falling geopolitical risk prompted investors to reach for yield despite the added credit risk.
| US Bond Indexes | Q2 Return | YTD |
|---|---|---|
| Bloomberg US Aggregate Bond Index | 0.87% | 0.62% |
| Bloomberg 1-3 Month U.S. Treasury Bill Index | 0.93% | 1.81% |
| ICE US Treasury 7-10 Year Index | 0.29% | 0.03% |
| Bloomberg US Mortgage Backed Securities Index | 0.89% | 0.99% |
| Bloomberg Municipal Index | 2.72% | 2.32% |
| Bloomberg US Corporate Index | 1.75% | 7.77% |
| Bloomberg US Corporate High Yield Index | 3.09% | 8.62% |
Source: YCharts
Third Quarter Market Outlook
As they did in 2025, stocks proved resilient in the first half of the year despite a string of macro surprises. Strong corporate earnings and underlying economic growth overcame doubts about AI profitability, war, and higher interest rates.
And there was plenty to confront over the first six months of 2026: a direct war between the U.S. and Iran, a spike in oil to multi-year highs, a rebound in inflation that swapped rate-cut hopes for rate-hike fears, and lingering questions about the broad profitability of AI. Each of those triggered a temporary bout of volatility — the worst coming in March, after the U.S./Iran war began — but each was ultimately offset by the two foundations of this bull market: strong earnings and solid economic growth.
The Q1 earnings season was far stronger than expected. The gains were led by AI-linked names like Nvidia and Micron, but the broader reality is that the vast majority of companies reported better-than-expected revenue and earnings, and that strength helped absorb the macroeconomic uncertainty.
Economic growth, meanwhile, consistently pushed back on stagflation fears following the war-driven spike in oil. Yes, inflation and prices rose — but growth never wavered. Virtually every indicator, from the labor market to manufacturing to services, pointed to solid activity.
Finally, AI enthusiasm remained a key driver of the rally. Large tech companies reaffirmed plans to spend hundreds of billions on data center and AI infrastructure, giving investors confidence in the future of AI and providing a broad economic boost as that spending ripples across the economy.
Yet as impressive as this resilience has been, we won't let it lull us — or you — into a false sense of security heading into the back half of the year. Real risks remain.
First, expectations for Fed rate hikes are rising. At the start of 2026, investors broadly expected one or two rate cuts this year. Now, with inflation elevated, the market is leaning toward one or two hikes instead. That isn't automatically negative for stocks — but the last time the Fed embarked on a rate-hike campaign, in 2022, stocks dropped sharply.
Second, the economy's and market's exposure to continued AI investment remains a genuine concern. That massive infrastructure spending is helping power growth — but if the companies footing the bill begin to doubt the return on it, they could pull back, and that would be an economic negative that flows straight through to markets.
Finally, the U.S. economy has been remarkably resilient in recent years, but it is not infallible. A persistent rebound in inflation threatens both consumer spending and the housing market. We'll be watching closely, because at today's elevated valuations, the market is not pricing in any loss of economic momentum.
In sum, we begin the second half of 2026 from a position of strength: earnings growth above historical averages, solid economic activity, and AI enthusiasm as boisterous as ever. But risks remain — elevated inflation that could crimp growth, potential rate hikes, and the market's vulnerability to a slowdown in AI infrastructure spending — and we will monitor each of them closely as we balance risk and reward.
At Noble Wealth Partners, we're committed to helping you navigate this environment thoughtfully. Successful investing is a marathon, not a sprint, and even sharp volatility is unlikely to alter a diversified approach built around your long-term goals.
That's why it remains so important to stay invested, stay patient, and stick to the plan — the personal allocation target we've built with you, based on your financial position, risk tolerance, and time horizon.
We remain focused on both the opportunities and the risks in these markets, and we're grateful for your continued confidence and trust. Please know that our entire team is dedicated to helping you navigate whatever comes next. As always, don't hesitate to reach out with any questions, comments, or to schedule a portfolio review.
