Q2 2026 Market Commentary
A Quarter of Two Halves
The second quarter of 2026 delivered a dramatic arc. There was sharp volatility from geopolitical shock, followed by one of the strongest market recoveries in recent memory. As we close out Q2, the S&P 500 has clawed back its earlier losses and is now up meaningfully on the year, a result that would have seemed unlikely in the depths of late March.
What unfolded is a reminder of a principle central to sound investing: staying disciplined through uncertainty is often rewarded, and the headlines that feel most alarming are frequently not the final word.
April and May: A Powerful Recovery
The quarter opened with markets in a fragile state, but conditions shifted quickly. April turned out to be the best month for both the S&P 500 and the Nasdaq since 2020. By early May, the index had reached fresh all-time highs. Wealth Break
Driving the recovery was a genuine fundamental story. First-quarter earnings came in far ahead of expectations, with S&P 500 companies growing earnings 28% year over year. Nearly 84% of S&P 500 companies beat analyst estimates, on pace for the strongest beat rate since Q2 2021. Equally encouraging, the gains weren't concentrated in a narrow slice of the market…broader participation provided confidence that the advance rested on more than a narrow group of large technology-oriented names. This continued the healthy breadth theme we highlighted coming out of Q1. U.S. Bank + 2
Looking ahead, the picture remains constructive. The estimated year-over-year earnings growth rate for Q2 2026 currently stands at approximately 22%, with the percentage of companies issuing positive forward guidance running well above both five- and ten-year averages. FactSet
The Geopolitical Wildcard: Iran and Oil
The quarter was not without turbulence. A conflict in Iran disrupted global oil markets and introduced genuine uncertainty into the economic outlook. Crude oil traded near $100 per barrel at quarter-end, and the combination of rising energy prices and renewed inflation pressure prompted markets to price out the rate cuts expected at the start of the year. More recently, a peace framework has begun to take shape. Geopolitical events are inherently unpredictable in their timing, but history consistently shows that economies and corporate profits prove more durable than the headlines of any given moment. Hightowersignature
The Fed: A New Chair, A Shifted Outlook
Kevin Warsh was confirmed as Fed Chair in mid-May and presided over his first policy meeting on June 17. The FOMC voted unanimously to hold the benchmark rate steady at 3.5%–3.75%, but officials removed their prior outlook for a rate cut this year. Now, the median projection for the fed funds rate at year-end moving to 3.8%, up from 3.4% in March. The shift reflects re-accelerating inflation driven largely by energy. The Consumer Price Index rose 4.2% annually in May, its highest level in more than three years, though core inflation (stripping out food and energy) was a more moderate 2.9%. CNBCNPR
That distinction matters: an energy-driven supply shock is meaningfully different from broad-based economic overheating. Whether the Fed ultimately hikes will depend heavily on whether the Iran situation stabilizes and energy prices recede.
What This Means for Your Portfolio
Q2 reinforced several things we believe deeply. Diversification worked as the rotation away from mega-cap concentration rewarded portfolios built with broad exposure across company sizes and sectors. And staying invested through the geopolitical shock proved essential; the recovery in April and May came swiftly, as it often does.
Looking ahead, we're watching the inflation trajectory, the Fed's actual rate path under Warsh, and whether strong earnings momentum carries into Q2 reports beginning in mid-July. We continue to manage your portfolio in alignment with your long-term goals, not in reaction to short-term headlines.
As always, please don't hesitate to reach out with any questions.
Thank you for your continued trust and partnership.
Sources: FactSet Earnings Insight, June 2026; CNBC/FOMC June 17, 2026 Meeting Coverage; Fox Business, June 17, 2026; NPR, June 17, 2026; U.S. Bank Market Commentary, June 2026; Hightower Signature Q1 2026 Recap, April 10, 2026.
The information presented in this newsletter is the opinion of West Michigan Advisors and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources but no liability is accepted for any inaccuracies. This is for information purposes and should not be construed as an investment recommendation. Diversification does not guarantee a profit or protect against a loss. Past performance is no guarantee of future performance. West Michigan Advisors is an investment adviser registered with the U.S. Securities and Exchange Commission. Securities offered through Level Four Financial, LLC, member FINRA/SIPC.