Cornerstone Advisory Mid-Year Market Checkup

Market Update: A Volatile First Half of the Year

The first six months of the year gave investors a wild ride, but it ended with a very positive lesson.  It was a classic “roller coaster” period.  The stock market faced major challenges, including conflict in the Middle East, rising oil prices, and changes in leadership at the Federal Reserve. Despite these scary headlines, the stock market shook off the bad news and finished the first half of the year very close to all-time highs.

The big takeaway for everyday investors?  Even when the daily news looks stressful, the underlying economy and company profits can still drive excellent growth.

By the Numbers: How the Market Performed

If you looked only at the final numbers for the first half of the year, you would think it was smooth sailing.  In reality, investors experienced several periods of uncertainty and market volatility along the way. Let’s dive a bit deeper.

• Technology Stocks: The tech-heavy Nasdaq index led the way, rising more than 12%. ¹ Investors poured money into technology companies, keeping this sector on top.

• The Broader Market: The S&P 500 gained 9.6%. ¹ This happened despite a sharp 9% drop in Spring when inflation and geopolitical fears peaked.  As we have seen many times before, investor sentiment can play a significant role in market pullbacks, whether short-lived or prolonged.

• Traditional Giants: The Dow Jones Industrial Average, which tracks 30 large, established companies, grew by 8.9%.
  ¹ This was its best start to a year since 2021.  Performance was driven primarily by robust corporate earnings, a resilient U.S. economy, and strong consumer spending despite elevated prices.  Healthcare led the charge with 3 of the top 5 index performers living in that sector (JNJ, UNH, MRK).

• Small Businesses: The biggest surprise came from small-cap stocks.  The Russell 2000 index jumped almost 22% over the first half period. ¹ This was one of the strongest starts for small companies since 1991, showing that growth is spreading beyond just a few giant tech firms.  This occurred despite higher interest rates, which have traditionally been a headwind for smaller companies. Notably, approximately 18% of the index moved to the Russell 1000 during the annual rebalancing process, compared to a three-year average of 7%. This suggests many smaller companies experienced strong enough growth to graduate into the large-cap index.The sector has been healthy for sure!

• Private Markets: In the first half of 2026, private markets experienced more selective deal activity, persistent exit bottlenecks, and uneven fundraising across managers. While the number of transactions slowed, deal sizes trended larger as investors focused on opportunities they believed offered the strongest long-term potential, most specifically infrastructure supporting artificial intelligence.  What did we see and hear?

• Selective Deployment: Investment managers focused heavily on large-cap, high-conviction opportunities, steering clear of valuation uncertainty.

• Sector Shifts: Software investments turned cautious due to AI disruption fears, rotating capital toward hard assets, infrastructure, and cash-flow-stable services.

• Macro Headwinds: Geopolitical volatility—including software sell-offs and Middle East tensions—forced a disciplined approach to investment pricing and leverage.

Three Big Trends That Defined the First Half

Three major stories drove the financial world and shaped how portfolios performed over the last six months.

• The Oil Price Spike: Early in the year, conflict in the Middle East threatened global oil supplies. This quickly pushed crude oil prices past $100 a barrel—a massive 53.9% surge. This sudden spike initially scared the stock market, causing a temporary 9% drop.  However, as ceasefire talks began and oil prices cooled down, investors realized the global economy was still stable.  Many investors used the dip as an opportunity to buy stocks at a discount, sparking a quick recovery.

• The Artificial Intelligence (AI) Boom Shifts Gears: The excitement around Artificial Intelligence remained a massive engine for the market. However, instead of just buying software companies, investors focused heavily on the physical infrastructure.  Money flooded into companies that build the physical hardware, computer chips, memory, and storage required to run AI systems.  Several of these hardware manufacturers saw their stock prices double or triple, lifting the entire market.

• Money Moves to New Places: By June, we saw a healthy shift in how people invest. Instead of putting all their money into just a handful of giant tech companies, investors started branching out. Capital began moving into other areas like manufacturing, energy, and smaller local businesses.  This is encouraging because a market supported by many sectors is generally more resilient than one driven by only a handful of companies.

Interest Rates and Bonds: Good News for Savers

Behind the scenes, the bond market underwent a very positive change for conservative investors.

Inflation remained a bit stubborn, and a new leader took over at the Federal Reserve. Because of this, interest rates stayed higher for longer than people originally expected. While higher interest rates can make borrowing money more expensive, they are excellent news for savers.

The yield on a 10-year U.S. Government bond stayed near 4.5%. This means that safer, fixed-income investments can now provide a reliable, solid stream of income to your portfolio without taking on the high risks of the stock market.  Meanwhile, the overall economy stayed on solid ground.  Consumers kept spending money, the job market remained stable, and fears of a major recession eased.

A Historic Boom for New Companies

The first half of the year also broke records for the number of companies joining the public stock market.  U.S. exchanges saw their strongest start in history for new listings, raising over $129.3 billion. The highlight was the historic SpaceX public listing in June. ² This massive event created a wave of excitement, encouraging many new companies in medical technology, advanced computing, and microchips to debut on the stock market.  This tells us that major institutional investors have high confidence in future technology and long-term growth.

Looking Ahead

The past six months proved that the financial markets are capable of handling bad news, global conflict, and higher interest rates when the underlying economy is healthy.  As we look toward the rest of the year, the best strategy is to avoid chasing hot trends.  Instead, focus on a balanced plan that combines steady growth investments, reliable non-traditional income-oriented holdings, safer traditional fixed-income investments, and if you qualify, low correlated and private market holdings.

Market roller coasters are much easier to navigate when you have a clear roadmap. Whether you are looking to protect your savings from inflation, grow your retirement nest egg, or find safer income streams, Cornerstone Advisory is here to help.

Email us to schedule a complimentary portfolio review or call our office today.  We will look at your current mix of investments, tailor a plan to your specific situation, answer your questions in plain English, and make sure your money is working as hard as possible for you.

The Cornerstone Team

1 Conlon, Sean, Chloe Taylor, Justina Lee, Lisa Kailai Han (2026, June 30). Dow jumps 100 points to close out best first half in 5 years; Nasdaq posts best quarter since 2020: Live updates. CNBC. https://www.cnbc.com/2026/06/29/stock-market-today-live-updates.html
2 (2026, July 1). Nasdaq Delivers the Strongest First Half in U.S. Exchange History as Public Markets Momentum Builds. https://www.nasdaq.com/press-release/nasdaq-delivers-strongest-first-half-us-exchange-history-public-markets-momentum

Sources:
JPMorgan Wealth Management
Goldman Sachs Wealth Management
Yardeni Research
Wall Street Journal
CNBC
NASDAQ