Stocks wrap up best quarter in years — though more volatility could be in store

• The S&P 500 and Nasdaq surged 14.9% and 21.4% respectively in Q2 2026, marking their largest quarterly gains since Q2 2020, while the Dow rose 12.9%
• The Russell 2000 small-cap index gained over 21% in the first half of 2026, its best performance since the first half of 1991
• Market analysts expect continued bull market conditions but caution that Q3 could bring weakness, particularly as investors focus on the Iran conflict and September historically brings 'late summer doldrums'

Summary:

U.S. stocks closed their strongest quarter in years on Tuesday, with the Dow Jones Industrial Average reaching a record 52,319.20 (up 0.3%), while the S&P 500 and Nasdaq rose 0.8% and 1.5%, respectively, marking the final trading day of H1 2026.

Key Performance Data:

• First Half 2026: Dow up 8.9% (best since 2021's 12.7%), S&P 500 up 9.6%, Nasdaq up 12%
• Q2 2026: S&P 500 surged 14.9%, Nasdaq jumped 21.4% (largest quarterly gains since Q2 2020), Dow rose 12.9% (strongest since late 2022)
• Russell 2000: Gained over 21% in H1 2026, best performance since H1 1991

Market Drivers:

Primary influences included oil prices related to the Iran conflict and concerns over AI stock valuations. The market faced volatility from geopolitical tensions and questions about whether tech companies have overinvested in AI infrastructure.

Outlook and Risks:

Analysts warn of potential volatility ahead, citing several factors:

• Ongoing Iran conflict could reverse recent gains
• November elections and potential Democratic congressional control
• Federal Reserve policy under new Chairman Kevin Warsh
• Historical weakness in Q3 of midterm years and September market patterns

Expert Commentary:

Ken Mahoney, CEO of Mahoney Asset Management, expects continued bull market conditions but advises investors to "expect volatility in both directions," noting July's historically strong performance contrasts with typically weak Q3 patterns. Concerns about "late summer doldrums" remain possible for 2026.