Monthly Market Commentary

One Market Split Four Ways

By Abbey Henderson, CFP®, RLP®, CAP®, AEP®

Investor Summary

June was the month the market got some good news and used it up fast.

Geopolitical risk actually eased. The Middle East conflict moved toward de-escalation, the disruption around the Strait of Hormuz calmed down, and crude oil dropped off its wartime peak. Gasoline slipped back below $4 a gallon by mid-month for the first time since March. That relief was real, and it showed up almost immediately in consumer sentiment and at the pump.

But energy’s fingerprints were still all over the inflation data. May CPI came in at 4.2% year over year, the highest reading since April 2023, and the Fed’s preferred gauge, the PCE index, told the same story at 4.1%. Both releases landed in June, and both kept the Fed in a holding pattern it clearly didn’t want to be in.

That tension came to a head at the June 17 FOMC meeting, the first chaired by Kevin Warsh, where the committee held rates at 3.50% to 3.75% for a fourth straight meeting. The statement got shorter, dropped language pointing toward future cuts, and leaned harder into restoring price stability. The median dot no longer shows a cut this year. A hike is now on the table.

Markets took the hint. Equities started June at record highs and spent the second half giving some of it back, with AI and large-cap tech leading the retreat as investors started asking harder questions about how the buildout gets paid for.

That’s the shape of June: real relief on the geopolitical side, real pressure almost everywhere else.

U.S. Equity Market Review

Source:  Morningstar & YCharts

Under the surface, June didn’t move as one market. The Dow advanced throughout the month and closed above 52,000. The Russell 2000 hit a record and led every major index for the year, up 21.9% through June 30. The S&P 500 finished the month lower despite a 0.8% gain on the final trading day, and the Nasdaq’s 1.5% jump on June 30 wasn’t enough to erase the damage tech had taken earlier in the month.

All three big benchmarks touched record highs in the first days of June before sentiment turned. By month’s end, the split was clear: the Dow was higher for the month, the Russell 2000 running ahead of everything, and the S&P 500 and Nasdaq were both lower for June while still comfortably positive for the year, up 9.55% and 12.79% respectively.

Sector leadership told the same story. Technology and semiconductors still mattered most to the index, but the story got more complicated. A potential U.S. listing by a major Asian memory-chip producer added supply worries to a group already sliding, and a bellwether memory manufacturer’s June 24 earnings report became the trade’s focal point. Energy, this spring’s star, gave back ground as oil fell.

Health care, consumer discretionary, industrials, and some cyclical names picked up the slack late in the month. Blue-chip and value names held up better than the growth trade around them, and retail-driven activity in a handful of heavily shorted stocks made another appearance.

Macro Backdrop

The Fed was the headline, but it wasn’t operating alone. Kevin Warsh chaired his first FOMC meeting on June 17, and the committee voted 12 to 0 to hold the federal funds rate at 3.50% to 3.75% for a fourth consecutive meeting. The updated projections raised the year-end inflation outlook along with the median rate path, and all but one policymaker now projects rates holding or rising through year-end. A quarter-point hike is now something the committee is actually weighing.

Inflation explains why. May CPI rose 0.5% for the month and 4.2% over the year, the highest since April 2023, with energy responsible for more than 60% of that monthly gain. Core CPI, stripping out food and energy, rose a more modest 0.2% for the month and 2.9% for the year, which suggests the pressure is still concentrated rather than spreading. The Fed’s preferred gauge agreed: May PCE rose 4.1% year over year, also the highest since April 2023, while core PCE hit 3.4%, its highest since October 2023. Producer prices ran hotter still, with May PPI up 1.1% for the month and 6.5% over twelve months, the largest annual increase since November 2022.

Growth held up better than the inflation data might suggest. The third and final estimate of first-quarter GDP, released June 25, showed the economy expanding at a 2.1% annualized rate, revised up from 1.6%, mostly on a downward adjustment to imports. Even so, the Fed’s own June projections trimmed the full-year growth outlook from where it stood in March.

Consumers are recovering from a low bar, not a high one. The University of Michigan’s sentiment index rose to a final 49.5 in June from May’s record low of 44.8, with respondents specifically pointing to cheaper gas early in the month. Year-ahead inflation expectations eased to 4.6% from 4.8%, and long-run expectations fell to about 3.3% from 3.9%. Sentiment is still well below where it sat before the spring conflict began, and cost of living remains the thing people bring up first.

Actual spending has been more resilient than the mood around it. May retail sales rose 0.9%, the fourth upside surprise in five months, reaching $763.7 billion and running 6.9% ahead of May 2025. Housing was more mixed. Existing-home sales rose 3.2% to a 4.17 million annualized pace, the strongest since December 2025, and the median existing-home price hit a May record of $429,300. New home sales fell to a 580,000 annual rate from 626,000 in April, and homebuilder confidence slipped to 35 as builders leaned harder on price cuts and incentives with mortgage rates still above 6.5%.

Regional manufacturing surveys pulled in different directions, which isn’t unusual this deep into a cycle like this one. The Richmond Fed’s composite index fell to 4 from 13, with shipments, new orders, and employment all softening. Philadelphia’s survey moved the other way, with its general activity and new orders indicators back in positive territory. Dallas was essentially flat month over month, though the region’s energy survey showed a sharp pickup in oil and gas activity, with its business activity index jumping to 46.1 from 21.0 in the first quarter.

The global backdrop leaned positive, but not uniformly. De-escalation in the Middle East helped risk sentiment in most regions, and emerging markets kept their lead for the year, with the MSCI Emerging Markets Index up more than 20% year to date. Asian markets tied to semiconductors and AI memory took the same hit U.S. tech did, though, and Europe was left weighing cheaper energy against inflation that hasn’t caught up yet. Each region is responding to a different piece of the same events, on its own timetable.

Commodities

Oil was this spring’s headline story, and June was mostly about the unwind. Brent crude, which had peaked above $120 a barrel at the height of the conflict in late April, entered June near $95 and fell to the low $70s as a ceasefire framework advanced and the Strait of Hormuz reopened on a conditional basis. Brent closed the month at $72.92, down roughly 21% for June, its biggest monthly decline since March 2020, though still up close to 20% for the year given how far it had run during the conflict. Lower crude flowed straight through to the pump, and gasoline dropped back below $4 a gallon by mid-month for the first time since March.

Gold told the mirror story. It had been a safe-haven trade during the conflict, and as the geopolitical backdrop calmed down, that trade unwound fast. Gold closed June at $4,007.69, down 11.8% for the month and now down about 7% for the year.

Earnings

Q2 earnings season hasn’t really started yet, but the setup is already shifting. FactSet counted 48 S&P 500 companies issuing negative EPS guidance for the quarter against 63 issuing positive guidance, a split that still tilts positive. Valuations have gotten less forgiving of disappointment, though. The forward 12-month price-to-earnings ratio for the S&P 500 sits at 20.1, above both its five-year average of 19.9 and its ten-year average of 19.0.

That valuation cushion is thinner than it looks once you factor in how much of the market’s gain has come from a small number of very large technology and AI-related names. The June 24 earnings report from a bellwether memory manufacturer, along with questions about a major Asian memory-chip producer’s potential U.S. listing, gave investors a reason to test that concentration. Whether the coming earnings season broadens the story or narrows it further is worth watching.

Bringing It Together

June closed on a stronger note than it spent most of the month on. Markets finished with a strong final session, leadership broadened a bit, and technology stayed central to both the damage and the recovery. But the bigger picture from the first half of 2026 is still mixed. Growth is holding. Inflation isn’t cooperating. And the Fed just told everyone it isn’t in a hurry to change that.

For investors, June is less about the month-end numbers and more about what comes next: how the Fed’s new leadership handles a rate path with no cut in sight, whether the AI trade’s capital-spending questions get answered or just get louder, and whether easing energy costs are enough to offset a stickier inflation print heading into the second half. Staying diversified across size and style, not just sector, is what actually protected results in June. The Russell 2000’s record run alongside a lower S&P and Nasdaq is the clearest argument this year has made for that yet.

That’s the discipline June calls for: don’t let a handful of mega-cap names define how you read the whole market.

Sources / Disclosures

• Market indices and levels: Morningstar, YCharts, S&P Dow Jones Indices, Dow Jones, Nasdaq, Russell Investments, MSCI, The Wall Street Journal market data, MarketWatch, Associated Press, and other public market-data providers.
• Volatility and derivatives: Cboe, CME Group, and related futures and options data providers.
• Economic data: U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, Federal Reserve, The Conference Board, University of Michigan Surveys of Consumers, and U.S. Census Bureau.
• Global markets and flows: MSCI, iShares, public index providers, and major financial news organizations.
• Housing data: National Association of Realtors, Freddie Mac, and regional realtor associations.
• Commodity data: CME Group, NYMEX/Comex, Energy Information Administration, The Wall Street Journal, and other commodity exchanges and market-data providers.