Monthly Market Insights June 2026
Greetings Team,
Futbol, Flags & Flame!
June was a month that tested our conviction, not by breaking the bull case, but by demanding we differentiate between noise and nuance. If May was about confirmation with discrimination, June became about rapid rotation with a correction. The market paused, pivoted, and in some corners, pulled back. Underlying fundamentals held, but the character of leadership shifted meaningfully.
June Performance and Rotation
The Nasdaq gave back a portion of its May surge, falling 2.8% for the month, while the equal weight S&P 500 (+2.3%) and the Russell 2000 (+3.6%) showed relative resilience, outperforming their large-cap peers. Markets posted their strongest first half to the year since 2020, with the Russell 2000 leading the charge with the best showing since 1991.
📉 S&P 500: 7,499.36 (-1.1% MoM)
📈 S&P 500 Equal Weight: 8,636.71 (+2.3% MoM)
📉 NASDAQ Composite: 26,213.72 (-2.8% MoM)
📈 Dow Jones Industrial Average: 52,319.20 (+2.5% MoM)
📈 Russell 2000: 3,025.20 (+3.6% MoM)
The narrative shifted from AI enthusiasm to AI spending skepticism. A handful of mega-cap names that powered May's advance saw significant profit taking, triggered by concerns over capex intensity and a perceived lack of near-term monetization. This was not a broad risk-off move; it was a selective reassessment of the most crowded trades. The Dow's modest gain (+2.5%) underscores the defensive rotation into value and income-oriented names.
Key Observations
Breadth improved from May. In June, the percentage of S&P 500 stocks above their 50-day moving average bottomed near 45% before recovering to 58% by month-end. Investors did not flee equities; they rotated away from crowded growth and into quality, yield, and overlooked cyclicals. The economy remains resilient for the most part.
With mid-term elections on the horizon, political and economic incentives increasingly support maintaining confidence in both the economy and financial markets. Historically, administrations prefer to enter election cycles with economic momentum and positive sentiment. As a result, I expect a steady flow of developments, initiatives, and policies aimed at supporting growth, stability, and investor confidence in the months ahead.
Key Themes
AI: From Proof to Pricing Discipline
June's AI narrative shifted from "who is winning" to "at what cost?" Following a series of analyst notes questioning the pace of AI infrastructure returns, the Magnificent 7 shed over $2.3 trillion in market value. The market is now pricing a more sober outlook: AI is real, the winners are mostly identified, but the valuation premium requires margin of safety. This correction was healthy, cleansing excess speculative froth. We view this as a pause, not a peak, for AI infrastructure leaders.
Consumer: Services Stabilize, Goods Soften
May's services softening proved transitory. June travel and dining data rebounded, though not to Q1 peaks. Middle-income consumers remain cautious on big-ticket durables, while the lower-income cohort showed early signs of stabilization in delinquency rates. The three-speed consumer remains intact: high-end spending is robust, the middle is selective, and the lower end is holding, albeit with less headroom.
Fed: Warsh Holds, Hawks Circulate
Chair Warsh's June press conference was a masterclass in appeasing the audience. Rates held steady, but the dot plot revealed a subtle hawkish repricing, with two additional participants now seeing one hike as possible before year-end. The market interpreted this as "higher for longer," sending the 10-year Treasury yield to 4.55% before settling at 4.45%. Fixed income volatility remained elevated, providing opportunities to capture duration dislocations. Time will tell if Warsh lives up to his word. Allowing markets to react to interest rate policy versus dictate. The current dichotomy across Wall Street on potential rate increases versus decreases through year-end is astounding to me; someone knows something I don't!
Oil and Geopolitics: Demand Fears Outweigh Supply Risks
Oil tumbled to just under $70/barrel, capping its worst quarter since COVID, down over 30% from March peaks. This precipitous decline was driven by demand concerns from China and potential for de-escalation efforts in the Middle East. While the reopening of the Strait of Hormuz helps alleviate immediate supply concerns, the broader market implication is that lower energy prices should provide a tailwind to consumers, transportation companies, and other economically sensitive sectors. For now, demand concerns are outweighing supply risks, helping contain inflation pressures and supporting economic activity.
SBOT (StevenBot) Update
SBOT navigated June's rotation effectively, albeit with reduced alpha capture compared to May. While AI infrastructure leaders experienced increased volatility amid spending concerns, tactical position management and selective additions to cyclical opportunities helped offset a portion of those drawdowns. Since inception, SBOT remains materially ahead of its benchmark. The current environment, including strong trends in select names and choppier conditions elsewhere, continues to play to the strategy's strengths.
Passive vs. Active Flows
May's passive mega-cap inflows reversed course in June. Active managers, having missed the early-year rally, used June's pullback to add quality cyclicals, especially small caps, and reduce large-cap tech exposure. The final week saw a resurgence of passive flows into equal weight and value ETFs, contributing to the narrowing performance gap. This mechanical rotation warrants monitoring into July.
Outlook
June taught us that even the strongest trends need pauses. The bull case remains intact: earnings expectations are solid, the Fed is on hold, and geopolitics are “inactive”. However, the leadership transition is underway. We believe the next leg of the rally will be broader, but not necessarily easier. Small caps, the leader so far this year, should continue to advance given their more attractive valuations relative to many large-cap counterparts. If market breadth continues to improve and interest rates stabilize, this segment could remain well positioned through the second half of the year. Active management, selectivity, and agility are paramount as the rebalancing of market dynamics pave the path forward.
The Dome of Doom is spreading across the United States: Four factors we're watching closely as we enter the Heat of Summer
- Earnings Season Prelude - Early reports from financials and consumer discretionary will set the tone. Watch for guidance, not just beats.
- Labor Market Data - The June employment report will be crucial. A softening but not collapsing jobs market would be the Goldilocks outcome.
- Oil & Inflation - A sustained move above $90/barrel would begin pressuring consumer discretionary margins. Despite some seasonal strength as we enter Summer, we expect range-bound trading, barring a geopolitical shock.
- Weather and Agriculture - The Super El Niño is materializing. Early crop reports and weather forecasts will increasingly influence agricultural commodities and insurance exposures.
Seasonally, July is often strong, but this year's setup is nuanced, elevated valuations, improved breadth, and a Fed likely on hold. We are not expecting a repeat of May's euphoria, but we are not positioning overly defensive either. Summer travel, holiday spending, and a packed sports calendar should provide an additional boost to consumer activity and economic sentiment.
Fundamentals are stronger than fears. The last three months have reinforced one key lesson: this is not a market for binary thinking. Conviction is built through adaptation, humility, and a relentless focus on what is working and why.
The journey is the destination.
As we celebrate Independence Day and the 250th anniversary of our nation's founding, we wish you and your family a safe, meaningful, and enjoyable holiday weekend.
Onward and Upward, Always!
Steven
STEVEN W. SCHMITT, MBA, CFP®, CPM®, CRPS®, ADPA®
Managing Director
Private Wealth Advisor
CA Insurance # 0G61253
The Schmitt Group of Raymond James
Raymond James & Associates, Inc. // 3CV
61 S. Paramus Road Suite 360, Paramus NJ 07652
Direct 551.497.5531 // Text 201.559.0775 // eFax 201.291.4298
steven.schmitt@raymondjames.com
raymondjames.com/schmittgroup
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Any opinions are those of Steven Schmitt and not necessarily those of Raymond James.
Expressions of opinion are as of this date and are subject to change without notice.
The information contained in this commentary does not purport to be a complete description of the securities, markets, or developments referred to in this material.
Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification.
Past performance does not guarantee future results.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.
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