First half stock market performance—new leadership?

Revenge of the laggards

Relative performance vs. the S&P 500, annualized

Source: Bloomberg, as of June 30, 2026. Annualized total returns. Indices used are Russell 2000, Russell 1000 Value, and MSCI All Country World ex-US Index.

Financial markets had plenty to contend with in the first half of 2026: the US/Iran conflict, higher inflation readings, and diminished expectations for interest rate cuts from the Federal Reserve. Nevertheless, the S&P 500 posted a solid total return of 10.2% for the six-month period.

The bull market that began in late 2022 continues. However, the drivers pushing equity benchmarks higher in the first half of the year marked a reversal from what dominated performance in the 2023-2025 period. That three-year timeframe was dominated by the Magnificent Seven mega-cap stocks and others considered beneficiaries of the artificial intelligence boom. An index of the Magnificent Seven stocks rose at a 63% annualized rate over that time period but was actually down slightly in the first half of 2026.

The chart above illustrates other trend reversals evident this year. Small companies, value stocks and international equities have all outperformed in 2026 after significantly lagging the S&P 500 over the prior three calendar years. While underperformance by prior market leaders can be unnerving to investors, rotation toward a broader set of opportunities usually helps to extend equity bull markets

What we’re watching this week

Monday

The ISM Services Index for June is released. Private service-producing industries account for over 70% of total US economic output.

Wednesday

Minutes from the FOMC’s mid-June meeting will be available. Investors are interested in the deliberations that occurred during Chair Warsh’s first meeting as leader.