Quarterly Market Insights | July 2026

U.S. and Canadian Markets

Stocks saw solid gains in the second quarter, riding a wave of enthusiasm over upbeat economic reports, ongoing diplomatic efforts in the Middle East, and strong first-quarter corporate numbers.

The Standard & Poor’s 500 Index rose 14.87 percent while the Nasdaq Composite gained 21.41 percent. The Dow Jones Industrial Average picked up 12.90 percent. The S&P/TSX Composite added 6.37 percent.1,2

I never think of the future. It comes soon enough.

Albert Einstein

April Set the Tone

Stocks surged in April, notching their best month since 2021 as investors cheered lower tensions in the Middle East and efforts to reopen the Strait of Hormuz. The Nasdaq’s 13-day winning streak, its best since 1992, underscored the market’s momentum.3

Big tech had a disproportionate effect on the broad market’s performance in April; the S&P 500’s information technology sector rose twice as fast as the overall Index, and more than double the gain of the second-best-performing sector.4

A Volatile May

Stocks rallied early in May, notching multiple intraday and closing records, even though volatility remained high. Wall Street cheered falling oil prices and an upbeat jobs report, but was a bit unsettled by a hot April inflation report.5,6

Kevin Warsh was sworn in as the new Fed chair late in the month, which appeared to bolster investor confidence, with all three major averages hitting multiple record closes.7

Dow 30 in June

In contrast to April and May, the Dow Industrials led the three major averages in June as investors rotated out of tech and into old-economy names. During June, the largest-ever initial public offering and the Dow hitting 52,000 for the first time captured investors' attention.8,9

By the end of the quarter, oil prices had fallen to their lowest levels since February. This helped boost defensive sectors such as healthcare and financials, which benefited from investors rotating out of big tech names.10

The final number showed the S&P and Nasdaq posted their best quarterly gains in 6 years, while the Dow had its best first half in 5 years. Additionally, the Russell 2000 Index of small-cap stocks logged its best first half in 35 years.10

U.S. Sectors

Eight of the 11 S&P 500 Index sectors advanced over the second quarter, but only two outperformed the overall Index.11

Information Technology (+43.53 percent) drove a disproportionate share of Index performance over the quarter, outperforming the overall S&P 500. Industrials (+14.81 percent) also had a strong quarter.11

Consumer Discretionary (+7.83 percent), Financials (+8.96 percent), Health Care (+8.69 percent), and Real Estate (+8.77 percent) all posted similarly solid gains. However, those sectors still underperformed the overall Index. Materials (+2.11 percent) and Consumer Staples (+2.03 percent) delivered low single-digit gains, while Utilities (-0.57 percent) finished close to flat, and Communication Services (-3.11 percent) declined slightly.11

Energy (-12.68 percent) finished dead last among the sectors, declining as oil prices fell.11

Canada Recap

Canada’s S&P/TSX Composite Index delivered solid results over the second quarter, front-loaded into the first two months.

The TSX climbed 3.65 percent in April, driven largely by energy companies, which carry one of the largest weightings in the Index. Big tech pushed through mixed economic news and uncertainty over U.S.-Iran negotiations, while the AI trade helped momentum. A late-month rally topped off April’s advance.12,13,14

The Index rose again in May, gaining 2.37 percent. Geopolitical tensions and fears of oil-driven inflation unsettled investors early in the month. Energy stocks held their ground, but still-high oil prices put some pressure on consumer-facing sectors. But the picture brightened in the second half, pushing the Index to a strong finish.15,16,17

June was quieter. Diplomatic progress in the Middle East pushed oil prices lower, weighing on the sector. Even so, the Index logged its eighth consecutive quarter of gains, the longest quarterly winning streak for Canadian stocks in 30 years.18,19

What Investors May Be Talking About in July

In the month ahead, expect financial markets to continue reacting to updates on diplomatic efforts in the Middle East.

Even though it will take time to restore oil and commerce flows through the Strait of Hormuz, investors anxiously await updates on ship traffic.

Investors will also continue to monitor inflation trends to see how changes in oil prices are rippling through the economy.20

Regardless, financial markets know that a return to “normal” global oil supply levels won’t happen quickly. Restarting capped wells is complex, and it may take time for refineries to rebuild depleted inventories.21

World Markets

The MSCI EAFE Index rose 9.8 percent over the second quarter, trailing all three major U.S. market averages.22

European markets performed well over the quarter. Spain (+14.21 percent), Italy (+16.64 percent), and Germany (+10.21 percent) led the developed markets, outperforming the overall index. France (+7.51 percent) and the United Kingdom (+3.15 percent) managed solid gains despite underperforming.22

Markets outside of Europe were more mixed. Egypt (+11.4 percent) outperformed the overall EAFE Index. Meanwhile, Brazil (-8.24 percent) was under steady pressure during the three-month period.22

Korea’s KOSPI was a standout for the quarter, delivering a head-turning 67.77 percent gain. Japan also caught the eye, picking up 37.21 percent. Australia gained 3.5 percent while Hong Kong fell 7.69 percent.22

Indicators

Gross Domestic Product (GDP)

The economy grew 2.1 percent in the first quarter, based on the final estimate of GDP. This was a half percentage point higher than the previous estimate. First-quarter GDP grew 4x faster than Q4 2025.23

Employment

Employers added 172,000 jobs in May, more than double economists' expectations and the third straight month of strong job growth. Over the 3 months through May, the economy averaged 188,000 job gains per month as the private and public sectors played catch-up after pausing hiring last year amid trade policy uncertainties and government budget cuts. The unemployment rate remained at 4.3 percent in May—its third consecutive month holding steady. Year-over-year wage growth rose 3.4 percent, cooling from April’s 3.6 percent gain.24

Retail Sales

Consumer spending rose 0.9 percent in May, ahead of expectations and more than double the pace of April’s 0.4 percent retail sales growth. Consumers spent more on autos and furniture, both of which declined in April. Year-over-year retail sales increased 6.9 percent in May, a pickup from April’s 4.8-percent increase and March’s 4.2-percent rise.25,26

Industrial Production

Industrial output edged higher by 0.1 percent in May over the prior month, missing expectations and slowing from April. Year over year, industrial production rose 1.7 percent, adding to April’s 1.4 percent annualized gain.27

Housing

Housing starts fell by 15.4 percent in May over the prior month, following April’s 8.5 percent decline. A 40.2 percent drop in multifamily starts drove most of the decline. In comparison, single-family starts slipped 1.9 percent as swelling construction costs, high interest rates, and labor shortages continued to stymie growth. Regionally, the Northeast (+17.5 percent) was the only region in which starts rose. By contrast, starts fell 1.6 percent in the South, 4.1 percent in the Midwest, and 4.9 percent in the West.28,29

Sales of existing homes jumped 3.2 percent in May over the prior month, exceeding the 0.7 percent rise economists were expecting. It marked the biggest monthly increase so far this year as April mortgage rates dropped and inventory increased. Regionally, sales were higher in the Midwest and South, more modestly higher in the Northeast, and flat in the West. The median existing home sales price was $429,300, 1.3 percent higher than in May 2025. The supply of unsold homes in May rose 3.3 percent month over month and 0.6 percent year over year to the equivalent of 4.5 months of supply at the current sales rate.30,31

Sales of newly constructed homes fell to 580,000 in May from 626,000 in April, missing expectations. Regionally, new home sales rose 16.2 percent in the Midwest and 3 percent in the Northeast, while falling 4.1 percent in the South and 26.9 percent in the West. The median new home price rose to $424,900 in May. Inventory of unsold new homes increased to 496,000 in May, equal to 10.3 months of supply at the latest sales pace.32,33

Consumer Price Index (CPI)

Consumer prices rose 0.5 percent in May, slowing from a 0.6 percent rise in April and a 0.9 percent increase in March. This gave consumers and investors hope that energy prices may have peaked. Energy continued to dominate the inflation reports, as more than 60 percent of the May increase in CPI came from energy—up from 40 percent in April. Core CPI rose 0.2 percent in May, cooling from April’s 0.4 percent rise and less than economists expected.34

Durable Goods Orders

Orders of manufactured goods designed to last three years or longer fell 4.5 percent in May. It was the largest drop in nearly a year and followed April’s upwardly revised 8.5 percent jump in orders.35

The Federal Reserve

As expected, the Federal Open Market Committee (FOMC) held rates steady at its June 17 meeting, keeping the Fed Funds Rate at a 3.5 to 3.75 percent target range. Despite the seemingly status quo decision, there was a lot more going on at first glance.

For one, this was newly appointed Kevin Warsh’s first FOMC meeting as Fed Chair. In his press conference that followed the decision, Chair Warsh’s emphasis on hitting the Fed’s 2 percent inflation goal was notable—and noted by investors, who will continue to closely monitor developments in the Middle East and their impact on inflation.36

The Federal Reserve meets four more times between now and year-end; the next FOMC meeting is July 28-29.