BY STRATEGIC ADVISERS INVESTMENT TEAM — JUNE, 2026
Market Conditions
Markets have shown encouraging resilience in the face of ongoing volatility. Despite geopolitical uncertainties, U.S. companies have reported strong earnings growth, which has helped to support stock prices. The S&P 500 Index and Nasdaq Composite Index hit new highs toward the end of May, primarily fueled by strong artificial intelligence (AI) and semiconductor momentum.1
- Earnings season look-ahead: For the second quarter of 2026, the estimated earnings growth rate (year-over-year) for the S&P 500 is 21.7%. If earnings grow at that pace, that will mark the second straight quarter of earnings growth above 20% for the index.2
- The U.S. economy created more jobs than forecast in May, adding 172,000 jobs. The overall unemployment rate was also unchanged, signaling stability in the job market.3
- Core PCE price index rose 3.3% year-over-year, marking the highest level since 2023.4 At the same time, consumers’ future expectations rose on hopes for a resolution in the Middle East and continued strength in AI-related spending.5
What it may mean for your portfolio
Even though stocks rose further in May, some consumers remain pessimistic, as sentiment readings reached all-time lows. Tensions in the Middle East and rising prices appear to be weighing on consumers, which may lead some to wonder how stocks can rise in a challenging environment.
While prices for gasoline and other goods have risen throughout the last few months, their impact on the economy has appeared manageable so far. Consumer spending continued to rise faster than inflation, and job creation was strong in May. Additionally, manufacturing activity has improved, driven by rising orders for new goods. The services economy, which includes dining, travel, and financial services, has also been thriving. Together, this economic activity likely led to strong corporate profit growth in the first quarter.
Although the resilience of the stock market so far this year may have surprised investors, the fundamentals that have led stocks higher appear solid. As always, we continuously research and analyze a wide range of information to understand the pace of economic growth and the outlook for corporate profit growth. Should higher energy prices begin to weigh more on the economy and earnings in the coming months, we would likely seek to manage risk within client accounts. However, prematurely getting cautious on stocks may lead investors to experience less growth by missing out on a potentially rising market.
Another area of debate that some investors have been focusing on is the potential impact of several high-profile initial public offerings (IPOs) that may come to market in the months ahead. We do not believe these IPOs signal anything noteworthy regarding the fundamentals driving the overall stock market. Though some of these IPOs may garner a lot of attention in the news, they would join thousands of other companies that are already listed on U.S. stock exchanges. Over time, the returns on these companies are likely to be driven by their respective earnings potential and other fundamentals. If some of these new companies experience volatility, then owning these companies within a broadly diversified portfolio of stocks may help reduce the implications of potential volatility for investors.
Outlook
Developments in the Middle East are still top of mind, and ongoing military tensions can lead to uncertainty for investors. While every situation is different, historically, markets tend to recover within months of a conflict breaking out. On the other hand, the U.S. economy has shown resilience in various areas. U.S. companies have continued to show strong earnings growth, which often helps support stock performance. Additionally, recent measures in the manufacturing and services industries suggest accelerating economic growth.6
Periods of volatility may occur for various reasons. However, staying diversified across U.S. and international stocks, bonds, and other asset classes may help weather market volatility and support progress toward long-term financial goals.
We continue to monitor and research developments related to the economy, corporate earnings, policy changes, and geopolitical events. Developments in the Middle East are shifting quickly, and we are closely following these events as they unfold. We believe the risk of an imminent recession remains low, but we are prepared to take action as the situation evolves.
Stick with your plan and stay invested
Market conditions can change quickly. We aim to guide clients through these varying conditions, which have largely led to strong performance over the past three years. Historically, the market has shown resilience even when news headlines may feel discouraging. As a result, we have maintained healthy exposure to stocks, even during bouts of market volatility. We believe that staying invested and managing risk through evolving market conditions can ultimately help you reach your financial goals in the long run.
