On The Street Monthly – Stocks Stage a Second-Quarter Comeback
On The Street NewsletterJuly 2026
Stocks Stage a Second-Quarter Comeback
Inside: The “Other 493” Power the Rally, What History Says After a Big Q2, and the Bond Market’s Quiet All-Clear Signal.
Markets
Stocks Stage a Second-Quarter Comeback
S&P 500, Q2 2026
+14.9%
Second-quarter surge
“Other 493” total return
+13.93%
S&P 500 ex-Magnificent 7
The year opened on a rocky note: oil prices were climbing, interest rates were rising, and investor confidence was fading. Then the second quarter flipped the script. The S&P 500 surged 14.9% as corporate earnings came in far stronger than expected. And unlike recent years, when a handful of tech giants known as the “Magnificent 7” did most of the heavy lifting, this time it was the other 493 companies in the index that powered the rally.
YTD Total Return: “Other 493” vs. Magnificent 7
(ex-Mag 7)
(MAGS)
Source: Y-Charts, total return year-to-date as of 7/6/2026.
The surprise? The “other 493” are up nearly 14% at the midyear mark, while the Mag 7 are actually down for the year. Why does that matter? When gains are spread across hundreds of companies instead of just a few, the rally stands on a much sturdier foundation, which is a healthy sign in bull markets, where even the leaders sometimes need to take a breather.
Market History
After a Quarter This Strong, Is the Party Over? History Says Not Yet
Times since 1950
10th
Q2 gain of >10% on record
Q4 positive, prior 9 times
100%
2nd half higher 8 of 9 times
After a big run-up like the one markets just delivered, it is only human to wonder when the good times will end. History offers some comforting perspective. The S&P 500’s 14.9% gain in the second quarter was just the 10th quarterly gain of that size since 1950.
| Q2 End | Q2 | Q3 | Q4 | Final 6 Mo |
|---|---|---|---|---|
| 6/30/1955 | 12.2% | 6.4% | 4.1% | 10.8% |
| 6/28/1968 | 10.4% | 3.1% | 1.2% | 4.3% |
| 6/30/1975 | 14.2% | -11.9% | 7.5% | -5.3% |
| 6/30/1980 | 11.9% | 9.8% | 8.2% | 18.8% |
| 6/30/1997 | 16.9% | 7.0% | 2.4% | 9.6% |
| 6/30/2003 | 14.9% | 2.2% | 11.6% | 14.1% |
| 6/30/2009 | 15.2% | 15.0% | 5.5% | 21.3% |
| 6/30/2020 | 20.0% | 8.5% | 11.7% | 21.2% |
| 6/30/2025 | 10.6% | 7.8% | 2.3% | 10.3% |
| 6/30/2026 | 14.9% | N/A | N/A | N/A |
| Average (prior 9) | 5.3% | 6.1% | 11.7% | |
| % Higher (prior 9) | 88.9% | 100.0% | 88.9% | |
| All years since 1950: % Positive | 61.8% | 80.3% | 72.4% |
Source: Carson Investment Research, FactSet, as of 6/30/2026. S&P 500 performance after a >10% Q2 quarter, 1950–current.
The track record is encouraging: in eight of those nine years, the market finished the second half higher and the fourth quarter was positive every single time. One note of caution: midterm election years tend to get choppy heading into November, so a few bumps along the way would not be unusual.
On balance, though, this kind of strength has historically signaled more room to run vs. a rally on its last legs.
Fixed Income
The Bond Market’s Quiet “All Clear” Signal
Current high-yield spread
2.75%
As of 7/2/2026
Post-2006 low
2.41%
Spreads remain near record tights
The bond market rarely grabs headlines the way stocks do, but it offers one of the most reliable early-warning signals on the market’s overall health: credit spreads. A credit spread is simply the gap between what riskier companies must pay to borrow and what the highest-quality companies pay. When investors get nervous, they demand extra compensation for lending to riskier borrowers, and that gap widens, which has often been a warning sign of trouble ahead. When the gap stays narrow, or “tight,” it means investors remain comfortable with even the riskier corners of the market, which tends to be a reassuring signal for the market as a whole.
High Yield Spreads: Selected Stress Peaks vs. Today
Crisis (peak)
Shock (peak)
(7/2/2026)
Source: Y-Charts, US High Yield Master II Option-Adjusted Spread, 12/31/2005–7/2/2026.
Notice how the biggest spikes line up with some of the market’s most difficult stretches. That is exactly why this measure is worth watching: if spreads begin to climb, it can be an early cue to turn more cautious. For now, spreads remain near their tightest levels, a quiet vote of confidence from the bond market in the current rally.
Data
Market Snapshot
For the month ending 6/30/2026 (cumulative returns)
| 1-Month | 3-Month | YTD | 1-Year | |
|---|---|---|---|---|
| Dow Jones Industrial Average | 2.52% | 15.71% | 8.85% | 18.65% |
| S&P 500 | -1.06% | 18.22% | 9.55% | 20.86% |
| NASDAQ Composite | -2.81% | 26.06% | 12.79% | 28.69% |
| U.S. Mid Cap | 3.65% | 19.00% | 17.39% | 22.88% |
| U.S. Small Cap | 3.71% | 16.91% | 13.17% | 25.08% |
| 1-Month | 3-Month | YTD | 1-Year | |
|---|---|---|---|---|
| Nikkei 225 | 5.63% | 35.03% | 39.18% | 73.05% |
| Hang Seng | -9.14% | -7.55% | -10.73% | -4.95% |
| Shanghai Composite | 0.63% | 4.36% | 3.16% | 18.87% |
| FTSE 100 | 0.84% | 3.64% | 5.70% | 19.82% |
| DAX | -0.43% | 10.78% | 2.06% | 4.54% |
| 1-Month | 3-Month | YTD | 1-Year | |
|---|---|---|---|---|
| Corporate Bonds | 0.11% | 1.26% | 0.88% | 4.10% |
| Municipal Bonds | 0.68% | 2.20% | 1.82% | 6.35% |
| High Yield Bonds | 0.09% | 2.05% | 1.69% | 5.15% |
| Rate | |
|---|---|
| 10 Year Treasury | 4.44% |
| Fed Funds (Effective) | 4.21% |
| Inflation Rate | 4.20% |
| Unemployment Rate | 4.30% |
| Value | |
|---|---|
| WTI Crude Oil | $69.50 |
| Gold ($/oz) | $4,038.50 |
| U.S. Dollar Index | 101.19 |
| CBOE Volatility Index | 16.45 |
Source: FactSet Research Systems Inc.; YCharts, Inc.; U.S. Bureau of Labor Statistics. Corporate Bonds, Municipal Bonds and High Yield Bonds are presented via representative iShares ETFs (LQD, MUB, HYG). Past performance is no guarantee of future results.
In the News
Articles We’re Reading
- General Motors and Micron sign a long-term memory chip supply deal. Quartz
- AWS announces a $1B investment in a new unit that will help its customers build and deploy AI systems. CNBC
- Retail investor activity in Mag 7 stocks is at its lowest level in four years. Bloomberg
- ECB’s Dolenc says there is no urgency to hike rates as long as energy markets remain calm. Bloomberg
■ Did You Know?
America just celebrated a milestone birthday.
This Fourth of July marked 250 years since the Declaration of Independence was adopted in Philadelphia on July 4, 1776. Big anniversaries of that date have a strange history of their own. On the nation’s 50th birthday, July 4, 1826, John Adams and Thomas Jefferson, the second and third presidents and the last surviving leaders of the founding generation, both passed away within hours of each other. James Monroe, the fifth president, also died on a July 4th, in 1831, making three of the first five presidents to pass on Independence Day. And Calvin Coolidge, born July 4, 1872, remains the only president born on the holiday. So while this year’s fireworks were bigger than usual for the 250th, the date itself has been collecting remarkable history for two and a half centuries.
Presented by the Investment Committee of Lake Street, an SEC Registered Investment Adviser.
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