CJM Wealth Advisers breaks down second quarter 2026 market performance and what to watch for the rest of the year.
The second quarter of 2026 turned out to be one of the strongest quarters for US stocks in years, a sharp reversal from a rocky start to the year.
A Standout Second Quarter
The Nasdaq Composite gained 21% in the second quarter, the S&P 500 rose almost 15%, and the Dow Jones Industrial Average added close to 13%. International stocks had a good quarter too, up about 10%, while bonds stayed roughly flat for the second consecutive quarter.
To put the Nasdaq’s move in perspective, the index has been around since 1971. Over that 55-year stretch, it has posted a quarterly gain above 20% only 17 times out of 220 quarters. A quarter like this one has happened less than 8% of the time in the Nasdaq’s history.
Earnings Did the Heavy Lifting
A big part of the story was earnings. Companies reported first-quarter results throughout April, and those results came in much stronger than expected. That gave stocks a lift right out of the gate, and the momentum carried through May before the Nasdaq dipped slightly in June.
Even with the S&P 500 up 15% for the quarter, stock valuations, measured by price relative to earnings, ended close to where they started. Earnings grew fast enough to keep pace with rising prices, so stocks are no more expensive now than they were at the start of the quarter.
A Rally That Broadened Out
The rally in AI stocks also resumed in the second quarter, and this time it wasn’t limited to the handful of large technology companies that have led the market for the past couple of years. Other providers of AI-related products and services participated as well.
June brought a shift beneath the surface. The headline indexes were mixed for the month, with the Nasdaq slipping, while value stocks and small caps held up particularly well. Year to date, the small-cap index is up over 20%, outpacing the large-cap names that have led the market since the 2008 financial crisis.
Putting the First Half in Context
It helps to remember how the year started. The first quarter saw losses across every major index, so the year-to-date numbers look more modest than the second quarter’s alone. Even so, the Nasdaq is up almost 13% for the year, the S&P 500 almost 10%, and international stocks more than 7%. Bonds are roughly flat for the year.
What to Expect in the Second Half
Looking toward the rest of 2026, the trend appears to be up. Earnings should stay strong, energy costs look likely to moderate, and employment data continues to hold at healthy levels, all of which should support consumer spending and corporate profits through year-end.
A few things we’re watching, though. September and October have historically been more volatile months for markets, and this year that seasonal pattern coincides with a congressional election in the first week of November. Elections don’t automatically lead to market declines, but the uncertainty around control of Congress could contribute to some short-term swings, similar to the pullback we saw in the first quarter.
There’s also a new Federal Reserve Chairman, Kevin Warsh, whose approach to interest rates relative to his predecessor is still an open question. How the Fed responds to employment and inflation data over the second half will be an important piece of the picture.
Where That Leaves Us
The first half of 2026 was a reminder that markets rarely move in a straight line. A rough first quarter gave way to one of the strongest quarters in years, driven by real earnings growth rather than rising valuations, and supported by a rally that broadened out beyond the largest technology names. Heading into the second half, the underlying trend looks constructive, even with a few near-term risks worth keeping an eye on.
Watch the full Q2 2026 Market Update above for Parker, Brian, and Kevin’s complete discussion.
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