The Score at Halftime: What Markets Are Telling Us
- Holzberg Wealth Management
- 11 minutes ago
- 10 min read
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Halftime Just Ended. Here’s the Score.
Last Saturday, Spain hoisted the FIFA World Cup trophy at MetLife Stadium in New Jersey, defeating the defending champions, Argentina, 1-0 in extra time. Spain dominated possession and created chance after chance – yet the scoreboard stayed frozen at 0-0 through 90 minutes. It took until the 106th minute for Spain’s Ferran Torres to finally find the back of the net and seal the victory. The underlying performance told the real story long before the scoreboard reflected it.
The first half of 2026 has felt much the same for investors. Underneath a steady stream of unsettling headlines – a war in Iran, oil prices spiking, inflation at multi-year highs, questions about AI, a new Federal Reserve chair – the fundamentals held up and markets climbed to 24 new all-time highs. Corporate earnings grew more than 20% over the last year, with all sectors posting positive earnings growth.
For much of the year, it felt like the market could break at any moment. But it didn’t. Investors who stayed patient and stayed invested collected those results. The fundamentals won out. And that’s the story worth telling as we enter the second half (of the year).
The First-Half Scoreboard
The S&P 500 returned about 9.6% in the first half of the year, reaching numerous all-time highs along the way. The Nasdaq gained 12.8%, and the Dow Jones Industrial Average rose 8.9%. The second quarter was particularly strong, with the S&P 500 returning 14.9%, driven largely by the market rebound that began at the end of March.
But the broader scorecard is arguably more interesting than those headline numbers. Headlines tend to focus on the S&P 500 – it’s the number that leads every financial news segment – but it’s a capitalization-weighted index, meaning the largest companies carry the most influence. When you look at an equal-weighted version of the S&P 500, where every company counts the same regardless of size, it’s up 11.98% since January. That gap matters: it tells us that gains this year haven’t been concentrated at the very top. Think of it like a World Cup squad winning not on the back of one superstar but because players across the entire roster are contributing. For years, U.S. large-cap technology stocks carried the market – a handful of mega-cap names doing the heavy lifting while the rest of the market followed. That dynamic has shifted meaningfully in 2026. Broad participation across the index has quietly been doing its job.
And it goes beyond U.S. large-cap stocks. Several other asset classes are outpacing the S&P 500 in 2026, through the end of June:
Small-Cap Stocks: +21.86%
Mid-Cap Stocks: +16.56%
Large-Cap Value Stocks: +15.19%
Emerging Markets Stocks: +23.76%
REITs: +12.72%
This kind of broad participation is one of the most encouraging developments for diversified portfolios, and it’s a continuation of a trend that began last year. Market leadership changes – often without warning – and being positioned across asset classes, rather than chasing what worked most recently, is precisely why diversification remains a sound long-term strategy.
One thing to keep in mind: while corporate earnings have supported strong returns, stock valuations are on the higher end historically. That doesn’t tell us what markets will do in the near term, but it does reinforce why careful investment selection and building portfolios around each client’s individual goals and risk tolerance – rather than simply buying what’s popular – remains the right approach.
Key Themes for the Second Half
In the World Cup, halftime is when teams reassess, make adjustments, and set the game plan for what’s ahead. Mid-year is a useful moment for investors to do the same. Here’s what’s likely to generate headlines in the second half of 2026, and how to think about each one.
Inflation and the Iran Conflict
The war in Iran was the year’s most disruptive macroeconomic event, pushing oil to nearly $120 per barrel at its peak before pulling back toward pre-conflict levels. Gasoline prices peaked above $4.50 per gallon nationally before retreating to under $4.00 more recently. For context, the long-term average since 2009 is approximately $2.99 per gallon.
That energy spike fed directly into headline inflation: the Consumer Price Index (CPI) hit 4.2% year-over-year in May, its highest reading in several years. But the important detail is underneath. The energy subcomponent alone jumped 23.5%, and core CPI, which strips out food and energy, rose only 2.9% over the same period. Economists describe this type of pressure as a “supply-side shock,” which tends to be more temporary than the broader, demand-driven inflation the country experienced from 2021 to 2023. If oil prices can continue to ease from their peaks, inflation measures may be approaching a high point for this cycle.
The Fed, Interest Rates, and What It Means for Bonds
In May, Kevin Warsh was confirmed as Federal Reserve Chair, succeeding Jerome Powell. At his first meeting in June, Warsh signaled a clear commitment to price stability, launching five working groups to study communications, the inflation framework, the balance sheet, AI and technology, and the data the Fed uses to assess the economy. Interest rates have fallen since the Fed began its cuts in late 2024, but expectations for further cuts have since flipped, with investors now anticipating potential rate hikes given both inflation and a strengthening labor market. The Federal Open Market Committee (FOMC) – the branch of the Federal Reserve that determines interest rates – is currently divided, with roughly half of members expecting rates to hold steady through year-end and the other half expecting them to move higher. For context, Fed leadership changes tend to matter less than the economic fundamentals the Fed is responding to – the central bank is usually reacting to trends rather than driving them.
There is a meaningful silver lining in this for investors. Interest rates across the board are well above where they’ve been for most of the past decade, which means bonds are actually earning meaningful yields again. Current yields have helped restore fixed income to its traditional role as a portfolio stabilizer and income generator.
The Labor Market: A Quiet Bright Spot
One of the less-discussed stories of the first half is how much the job market has strengthened. Payroll growth accelerated to an average of about 111,000 jobs per month from April to June, a notable improvement from last year’s weak pace of around 10,000 per month. The unemployment rate fell to 4.2%, well below its long-run historical average of 5.9% since 1960. Job openings increased in June and remain above their historical average. A healthy labor market connects directly to household income, consumer spending, and the corporate revenues that ultimately drive earnings and stock prices. Behind the geopolitical headlines, the domestic economy has been holding up. That’s not a reason to be complacent, but it is a meaningful counterweight to the more alarming narratives that have dominated financial news this year.
AI: A Long Game
Artificial intelligence has been the market’s most closely watched storyline. Large technology companies have continued investing heavily in AI infrastructure, and high-profile IPOs are anticipated in the months ahead. The Magnificent 7 companies (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) have returned over 300% from the start of 2023 through the end of the second quarter, compared to 92% for the S&P 500 over the same period – though their recent performance has lagged the broader index, with the rest of the S&P 500 outpacing them by a wide margin this year.
The right context for AI is a longer one. The internet’s long-term winners – today’s largest technology companies – took decades to grow into the scale investors anticipated in the late 1990s. The companies that dominated the infrastructure phase weren’t always the ones that generated the greatest long-run returns. AI represents a genuine and potentially transformative shift. But maintaining broad exposure to the theme through a well-diversified portfolio – rather than concentrating in any single AI-related bet – is the approach most consistent with long-term success.
The Midterm Elections
Political headlines will intensify as November approaches. It’s natural to wonder how a potential shift in Congressional control might affect taxes, spending, or regulation. But the historical record is consistent: over almost a century, markets have been positive under every combination of political party control, on average. Since 1933, the S&P 500 has averaged annual total returns of 8.6% during midterm election years. When election years have produced poor returns, the cause has almost always been economic in nature – a financial crisis, aggressive monetary tightening – rather than the election itself. Keeping political views and financial goals separate is harder than it sounds, but the historical record consistently rewards investors who manage to do it.
Expect More Volatility. That’s Normal
The S&P 500’s maximum intra-year drawdown in 2026 has been approximately 9%, which is actually below the historical average of around 15% per year since 1980. The year has felt volatile because the headlines have been loud, but the actual pullbacks have been modest by historical standards. Over the last 100 years, the market has declined at least 10% on average every 11 months. Volatility isn’t a warning sign. It’s the price of admission for investing. Expect more volatility in the second half. The goal isn’t to avoid it; it’s to be positioned to stay invested through it.
The Investor’s Halftime Rule
Here is perhaps the most important lesson from both the World Cup and the markets this year: the team that panics at halftime, makes wholesale changes based on the score in the moment, and loses confidence in its fundamental game plan is rarely the one that lifts the trophy.
Spain didn’t score until the 106th minute. But they didn’t abandon their strategy simply because the goal hadn’t come yet.
Markets are the same. Every major market gain since 2009 has come alongside a credible reason to step aside: a debt downgrade, a global pandemic, a banking crisis, tariff shocks, and now a war and resurgent inflation. Despite all of it, U.S. stocks have returned more than 15% annualized since 2009 – roughly 50% above its long-term historical average. Since 1926, the S&P 500 has been higher one year after hitting a new market high 81% of the time, with an average annualized return of nearly 14%. The investors who stayed invested collected those returns. The ones who waited for a clearer picture largely did not.
The second half of 2026 will have its own version of all of this. The goal isn’t to predict every headline or sidestep every swing; it’s to remain prepared for uncertainty while continuing to participate in progress. Stay diversified. Keep near-term spending needs funded, so you’re not forced to sell at the wrong moment. And let compounding do its work.
The whistle has blown on the first half. The game isn’t over. Stay on the field.
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Monthly Changes in Indices
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Monthly Performance By Sector
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Interest Rates: The Federal Open Market Committee (FOMC) meets later in the month and will announce then any changes to interest rates.
Inflation: The Consumer Price Index (CPI) decreased 0.4% month-over-month in June. Over the last twelve months, CPI increased 3.5%. Core CPI (which excludes food and energy) was unchanged in June compared to May and rose 2.6% compared to a year ago.
Housing: According to the National Association of Realtors, existing home sales decreased 2.4% month-over-month in June and increased 2.8% from one year ago. The median existing-home sales price rose 1.8% from June 2025 to $440,600. Sales of new single-family houses increased 1.6% in June from May and fell 5.6% from June 2025. The median sales price of new houses sold in June was $398,300 – a 2.7% decrease from a year ago.
Mortgage Rates: As of July 23rd, 2026, the weekly average for a 30-year fixed-rate mortgage is 6.58%, above the 52-week average of 6.32% and down 0.16% from a year ago.
Employment: According to the Bureau of Labor Statistics’ Employment Situation Summary, unemployment changed little in June at 4.2%. Employment continued to trend up in professional and business services, social assistance, and health care.
Consumer Sentiment: The University of Michigan’s Surveys of Consumers ticked up 10% in July. Compared to its reading from one year prior, consumer sentiment is down 11.8%. Year-ahead inflation expectations inched down from 4.6% in June to 4.2% in July. Long-run inflation expectations held steady from last month at 3.3%.
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About the Author
Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and nationwide with the financial decision-making process to organize, grow, and protect your assets.
** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions. Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Any charts and graphs provided are hypothetical and for illustrative purposes only, are not indicative of any investment, and assume reinvestment of income and no transaction costs or taxes.
