Wall Street ended the week higher as investors looked past weakness in the labor market. The June jobs report showed the U.S. economy added just 57K jobs, well below expectations, while the unemployment rate unexpectedly edged down to 4.2%. The softer payrolls number scaled back expectations for a Fed rate hike this year and increased the odds of a rate cut before year end.
Q2 2026 ended with Iran back in the headlines and markets trying to move past another round of strikes. The U.S. hit Iranian targets. Iran responded with attacks on Bahrain and Kuwait. By the end of the week, both sides agreed to resume negotiations in Doha. Markets treated the exchange the same way they have treated every flare up since the initial agreement was signed – they ignored it.
For the week, the S&P 500 gained 1.76%, led by financials and communication services. The Dow Jones Industrial Average closed at a record high on Thursday, while the Nasdaq lagged as investors took profits in the biggest technology winners.
Future Wealth’s View
The S&P closed the quarter up 14%, its best since 2020. The Nasdaq closed up 20%, also its best since 2020. The Dow gained over 12%, its best quarter since 2022. The Russell 2000 had its best first half since 1991. Those numbers happened despite a war, a Fed chair transition, and a tech selloff just last week. The quarter that started with oil above $100 and a closed Strait ended with oil near $70 and a ceasefire holding despite repeated retaliations from both sides.
As we enter, 2H:2026, the attention is back on the Fed. Fed Chair – Kevin Warsh spoke at the ECB forum in Portugal last week and said inflation risks have eased since the last meeting and that AI could expand the productive capacity of the economy. If he genuinely believes AI expands supply and cools inflation, we could potentially see an interest rate cut by end of the year.
A low interest rate environment coupled with a stable economy, low unemployment and inflation under control bodes well for US corporations entering the 2H:26. With S&P 500 near all time highs, expecting a 10% or higher return in 2H:26 may be unrealistic but we believe the risks of a correction have diminished.