2026 Second Quarter Market Summary
Earlier this week, the second quarter (Q2) officially drew to a close on Tuesday, June 30th. You may remember Q1 closed earlier this year with the S&P 500 down -4.6% on March 31st.
Stocks staged a dramatic comeback in the second quarter of 2026, making for their best quarter since the spring of 2020. Investors looked past the volatility from the Iran war and growing expectations of Federal Reserve interest rate hikes. The rally was led by a revival of the artificial intelligence trade with a different set of players from before, as hardware stocks posted massive gains. Notably, even after three years of big gains in the AI trade, the quarter saw some of the biggest quarterly rallies on record for some AI-heavy indexes.
Meanwhile, the agreement to end the Iran war sent oil prices tumbling, relieving the worst-case inflation fears and allowing bond prices to rise. In the background, it was also a tough quarter for gold prices, and bitcoin appears to have entered a new “crypto winter.” Our focus this week highlights key summary data with the second quarter now concluded.
Second Quarter Market Performance Summary
- S&P 500 - +14.9%
- NASDAQ Composite - +21.4%
- Dow Jones Industrial Average - +13.0%
- Russell 2000 - Approximately +21%
The S&P 500 and NASDAQ posted their strongest quarterly gains since 2020, while the Dow recorded its best quarterly performance since 2022. Small-cap stocks also enjoyed an exceptional quarter, with the Russell 2000 delivering its strongest first-half performance in more than three decades.
Bond Yields Looking Higher for Longer
The bond market had a bumpy ride in the second quarter, with yields rising alongside inflation and prices falling amid shifting expectations for the Fed. However, as oil prices fell back toward prewar levels, bond yields fell back from their highs. Analysts believe upward pressure on bond yields is also coming from rising budget deficits in the United States, Japan, and across Europe, combined with a huge jump in borrowing (investment-grade bond market) from hyperscalers like Amazon (AMZN) and Alphabet (GOOG) to help finance the AI buildout. On the plus side, many fund managers say bond yields are looking attractive.
Bitcoin - Signs of Winter
Cryptocurrency enthusiasts call an extended bear market for cryptocurrencies a “crypto winter.” In the second quarter, bitcoin’s decline showed no signs of slowing, with the largest cryptocurrency falling roughly 13% below $59,500 as of June 30. This followed a 23% decline in the first quarter. Bitcoin has now seen a 53% drop from its all-time high of nearly $126,200 in October 2025.
The selloff was primarily driven by institutional selling, persistent ETF outflows, regulatory uncertainty, and a broader shift in investor attention away from crypto toward AI. The decline has also triggered a wave of forced liquidations in crypto derivatives markets, accelerating volatility and downward momentum as leveraged investors were pushed out of positions. Adding to the selling pressure was a sustained exodus from crypto ETFs.
