2026 Midyear Market Update

We're halfway through 2026 and it's been an eventful year so far. The conflict in the Middle East, oil prices spiking above $100, stubborn inflation, and a daily news cycle that makes it easy to feel like everything is falling apart.

What is Happening in the 2026 Markets?

U.S. stocks have gained roughly 10% so far this year. Most people are surprised when they hear that because the news has felt relentless. But markets often move ahead of the news, not with it. This isn't a rally built on wishful thinking. Companies are actually earning more money than they were a year ago, and that's what's driving prices higher.

Is AI Just Another Dot-Com Bubble?

It's the question I'm hearing most right now. 



The late 1990s dot-com boom was built on speculation. Companies raised billions, built technology infrastructure, and then waited for customers to show up. Many never did, and when the bubble burst, investors lost significant money.

Today's AI story is different in one important way: the demand is already here. Businesses are actively using AI tools, paying for them, and integrating them into their operations right now. The investment in AI infrastructure is following real, existing demand, not betting on demand that might show up someday. That doesn't mean AI stocks can't be overvalued or that there won't be volatility. But it's a fundamentally different setup than 2000.

A relatively small group of large technology companies is driving much of the market's gains right now. In fact, over half of U.S. earnings growth this year is expected to come from AI-related industries — chips, data centers, and the systems that make it all run. That's worth being aware of and it's one of the strongest arguments for owning a little of everything rather than putting too much weight in any one area.

What Does the SpaceX IPO Mean for My Portfolio?

SpaceX went public in June as the largest IPO in history, valued at over $1.7 trillion and it changed the rules for how some index funds work.



The Nasdaq changed its rules to fast-track SpaceX into its index just 15 days after the IPO, so if you hold Nasdaq-focused funds, you picked up some SpaceX exposure automatically. The S&P 500 took a different stance and held firm on its longstanding requirement that companies actually be profitable before joining. SpaceX lost over $4 billion last quarter, so that exposure won't happen until at least mid-2027.

Because your investments are spread across many different companies, you don't need to have a view on SpaceX to be well positioned. No single company, however large, determines your outcome.

What about inflation?

Inflation has been more stubborn than most people expected heading into 2026. Higher energy costs from the Middle East conflict have kept prices elevated at the gas pump and in grocery stores — the places we feel it most directly.

The good news is that this type of inflation tends to be temporary. When energy prices settle down, and historically they do, everyday prices tend to follow. We're nowhere near the levels we saw in 2022, and the conditions that drove inflation that high aren't what we're dealing with today.

Why Aren't Interest Rates Coming Down?

At the start of the year, you may have been expecting the Fed to start cutting interest rates. That hasn't happened. Inflation has been stickier than expected and rates are now likely to stay where they are through at least 2027.

That might sound frustrating, but higher rates mean the bonds in your portfolio are actually earning something meaningful right now. For years, bonds were barely keeping up with inflation. That's changed, and it's now working in your favor.

Is the Economy in Trouble?

Behind all the market noise, the actual economy has held up well. Job growth remains solid, consumers are still spending, and the unemployment rate is near historically strong levels. Growth has slowed from the pace of recent years, but slow and steady is a very different thing from falling apart.

The things worth watching in the second half of the year: whether higher energy costs push inflation up more broadly, how the Middle East situation continues to develop, and midterm elections later this year, which tend to bring their own round of market noise regardless of outcome.

What This Means for Your Financial Plan

A good financial plan already accounts for the fact that markets don't move in a straight line, that interest rates change, and that headlines are often louder than the underlying reality. It accounts for years like this one.



Being diversified means participating in AI's growth without being entirely dependent on it. It means rising interest rates are working in your favor on the bond side even while they create uncertainty elsewhere. It means you don't need to have a view on SpaceX, or oil prices, or who wins the midterms, to stay on track.

What Should I Expect in the Second Half of 2026?

Markets have proven more resilient this year than most investors expected. The underlying economy is holding up, earnings are growing, and a well-diversified portfolio has been doing exactly what it's designed to do by participating in the gains while cushioning the volatility.

That said, the path forward probably won't be perfectly smooth. A handful of large technology and AI stocks have been doing most of the heavy lifting this year and when gains are that concentrated, a stumble in those names can feel more dramatic than it actually is. What's more likely than a broad downturn is rotating corrections, where different parts of the market take turns pulling back rather than everything falling at once. If you're diversified across many different areas, that's exactly the environment your portfolio is built to handle.

The second half will bring new headlines: midterm elections, inflation data, Fed decisions, and whatever we can't yet anticipate. None of that changes the fundamental case for staying invested and staying the course.

As always, if anything here sparked a question about your own situation, I'm here.

— Renee