Q2 Recap: Markets Get Back on Track

• Technology sector rebounded strongly in Q2 after posting nearly double-digit negative returns in Q1, driven by AI spending and efficiency gains, while Energy lagged as oil prices fell from over $100 per barrel
• Emerging Markets led global equities despite China posting its second consecutive negative quarter, with South Korea and Taiwan returns exceeding 50% and overcoming Chinese weakness
• Technical and fundamental momentum remain broadly positive by RiverFront's measures, though a Federal Reserve likely on hold and strong recent gains prompt cautious monitoring of tactical indicators in shorter-horizon portfolios

Q2 2026 Market Summary

Market Performance Overview

Global stocks demonstrated resilience in Q2 2026, rebounding strongly despite geopolitical concerns and macro headwinds—exemplifying the "wall of worry" concept. The rally gained momentum as Iranian conflicts de-escalated, with oil markets responding positively.

US Sector Performance

Technology led US sectors by a wide margin with near double-digit gains, reversing prior quarter losses. Strong earnings driven by AI spending and efficiency gains fueled the rally. Industrials also posted strong returns on similar tailwinds.

Energy was the quarter's worst performer after oil prices fell from Q1 peaks above $100/barrel. Utilities also struggled, posting negative returns due to rising interest rates (sectors with steady cash flows behave like bonds) and reduced demand for defensive positioning as investors adopted a more risk-on posture.

International Markets

Emerging Markets (EM) led global equities despite China posting negative returns for the second consecutive quarter. South Korea and Taiwan emerged as new EM growth drivers, each posting returns exceeding 50%, offsetting Chinese weakness and sluggish Latin American performance.

The US dollar strengthened throughout the quarter, with the Japanese yen and Canadian dollar lagging most. The yen's weakness reflected increased risk-on sentiment, while the Canadian dollar suffered from falling oil prices given Canada's commodity-dependent economy.

Outlook

RiverFront remains cautiously optimistic, emphasizing that strong earnings allow markets to overcome headline concerns. Both technical and fundamental momentum remain broadly positive by their measures. However, after a strong quarter, shorter-horizon teams are monitoring tactical indicators carefully, particularly given a Federal Reserve likely remaining on hold.

The firm continues stressing earnings analysis as the critical factor enabling market advances despite potential headwinds.