Newsletter - US Capital Markets 2Q26

US markets in 2Q26 regained a firmer footing as easing Middle East tensions and a retreat in oil prices restored risk appetite, aided by resilient AI-driven capital expenditure. Equity performance stayed selective, with US markets narrowly outperforming non-US on a resurgence in mega-cap technology, while the Mag 7 lagged the broader large-cap index for a second consecutive quarter as leadership narrowed to Information Technology and the rest of the market re-rated higher. Fixed income conditions stayed resilient, with Treasury yields moving modestly higher while credit spreads tightened to near historically tight levels. Growth momentum faded as payroll gains slowed and services activity stalled even as manufacturing strengthened. Inflation reaccelerated to a multi-year high on the quarter's earlier energy spike and stayed above the Fed's target, prompting towards a higher-for-longer policy stance.