After a rocky start to the year, the second quarter of 2026 reminded investors why patience is one of the most valuable investing skills.
Nearly every major asset class finished the quarter with positive returns. Large U.S. companies continued to perform well, small-company stocks staged an impressive comeback, international markets participated in the rally, real estate rebounded sharply, and even bonds provided positive returns. It wasn’t one of those quarters where a single investment did all the work—it was a quarter where diversification paid off.
Global Equity Markets
| Asset Class | Second Quarter | Year-to-Date |
|---|---|---|
| U.S. Large Cap Stocks (S&P 500) | 15.2% | 10.2% |
| U.S. Small Cap Stocks (Russell 2000) | 21.5% | 22.6% |
| International Stocks (MSCI World Ex-U.S.) | 10.5% | 9.6% |
| Real Estate (FTSE / EPRA NAREIT Global REITs) | 12.4% | 17.8% |
| U.S. Bonds (Bloomberg U.S. Aggregate Bond Index) | 0.7% | 0.6% |
Sources: FTSE/NAREIT, Russell, Bloomberg, MSCI, Standard & Poors as of 6/30/2026
Large U.S. Companies Post a Strong Quarter
The biggest companies in America continued to demonstrate why they have earned investors’ confidence. Corporate earnings remained healthy, consumer spending held up better than many economists expected, and enthusiasm surrounding artificial intelligence continued to support many technology-related businesses.
Despite ongoing headlines about inflation, tariffs, and the Federal Reserve, businesses generally adapted well. Investors increasingly focused on company profits instead of worrying about every economic or global event headline.
Small Companies Finally Had Their Turn
One of the biggest stories of the quarter was the resurgence of small-company stocks.
For several years, the market’s gains have been dominated by a handful of very large companies. During the second quarter, investors began looking beyond those familiar names. As confidence in the economy improved and fears of recession eased, money flowed into smaller companies that had been largely overlooked.
This is a healthy reminder that market leadership changes. Asset classes that lag in one period may lead in another – often in ways no one can predict in advance.
International Stocks Quietly Delivered for Investors
International stocks also had an excellent quarter. For years, many investors questioned whether it was worth owning stocks outside the United States. Yet the past two years have demonstrated one of the primary reasons we diversify globally. European and Japanese companies benefited from improving economic conditions, while a weaker U.S. dollar boosted returns for American investors owning foreign stocks. No one knows when international markets will outperform, which is precisely why we maintain exposure to them rather than trying to time it.
Real Estate Came Back to Life
Real Estate Investment Trusts (REITs) were among the strongest performers of the quarter. Higher interest rates weighed on real estate over the past several years because borrowing became more expensive. As investors grew more confident that interest rates were becoming more stable, many real estate investments recovered nicely. REITs also generally offer dividend income, which has become more appealing as investors look beyond high-growth technology companies.
Bonds Did Exactly What We Want Bonds to Do
Bonds rarely make headlines because they usually aren’t supposed to. While stock markets experienced much larger gains, bonds quietly generated positive returns while continuing to provide income and stability. Today’s higher interest rates mean investors are finally earning meaningful income from high-quality bonds again. That steady income can help cushion portfolios during periods when stocks inevitably become more volatile.
The Bigger Picture
The first half of 2026 serves as another reminder that successful investing isn’t about predicting which asset class will perform best next quarter.
Few people would have predicted at the beginning of the year that small-company stocks and real estate would become some of the market’s strongest performers. Yet that’s exactly what happened.
Trying to guess the next winner is extraordinarily difficult. Building a diversified portfolio that owns many different types of investments has historically been a more durable approach than trying to pick winners.
If there’s one thing we can count on, it’s that markets will continue to surprise us. Fortunately, a well-diversified portfolio doesn’t require us to know what comes next. It simply requires the discipline to stay invested long enough for diversification to do its job.
For more information on second quarter performance please click here.
Disclosure: All investing is subject to risk, including the possible loss of the money you invest. Past performance is no guarantee of future returns. Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.