In this July 1, 2026 market commentary, Kenny Polcari reviews the second‑quarter performance of U.S. equities, bonds, commodities and the macro backdrop. He highlights that the S&P 500 posted its strongest quarter in six years (up 14.9%), with broad participation across sectors and market‑cap ranges, while the Dow and Nasdaq also posted multi‑year best quarters. He explains the “wall of worry” narrative—stocks rising despite persistent geopolitical tension (Middle‑East war, Strait of Hormuz blockage), stubborn inflation, shifting Fed policy expectations, and election‑year uncertainty. Polcari breaks down sector returns, noting tech’s 31% gain, industrials, financials and small‑caps leading the breadth expansion, and energy’s 14% loss. He details bond‑market moves (2‑year yield to 4.17%, 10‑year to 4.46%, 30‑year to 4.96%) and commodity reversals: oil down 14% after a mid‑quarter rally, now near $69/bbl, and gold down 14% to about $3,985/oz, both pressured by a tentative Iran‑related peace deal and expectations of higher rates. The economic calendar for the day includes Challenger job‑cut data, mortgage applications, ADP employment, ISM manufacturing, and upcoming non‑farm payrolls, with emphasis on the prices‑paid component as a potential market mover. Polcari advises investors to use good‑til‑canceled orders for desired pull‑backs, accept lower holiday trading volume, and avoid over‑reacting to headlines, while reminding viewers to maintain diversified, risk‑aware portfolios amid upcoming election volatility. He offers a complimentary portfolio review (phone 561‑931‑0190) and concludes with a recipe for a watermelon‑avocado summer salad for a Fourth‑of‑July barbecue.
Chapters
Well, good morning. Yes, it's me, Kenny Polcari. Today is Wednesday, July 1st, 2026. We are now officially into the second half of the year, and here are the things that you need to know. Well, it was the best quarter in 6 years for the S&P, right? I know you were questioning it during the quarter, but that's how it ended up. Treasury yields ended high for the quarter. Oil and gold down 14% on the quarter. The The second half of the year begins today and it's all about election anxiety for now. What are we having for dinner tonight? We're gonna have the watermelon and avocado summer salad. All right. Good morning and welcome to part 2, 'cause yesterday we marked the end of the second quarter in the first half of the year. What a 6 months it's been. I mean, just think about everything that the market had to digest. It was a war in the Middle East creating all kinds of geopolitical conflicts, right? It was a block of the Strait of Hormuz that impacted global trade for 4+ months. Surging oil prices leading to surging gasoline prices. New management at the Fed. Inflation that remains stubbornly high. Talk of expected rate cuts turned into talk of rate hikes. And an AI panic, at least for a few days, that had many traders convinced that the trade was dead and over. Yet, Maybe hard to believe, but the S&P had the best quarter in 6 years. The old phrase that we're climbing this wall of worry was never truer. The market climbs a wall of worry when stocks continue to rise despite this constant stream of bad news, uncertainty, and reasons to be afraid. Investors worry about war, inflation, higher interest rates, geopolitical conflict, elections, recession, earnings, valuations— you name it, they worried about it. Every headline giving them a reason to hit the sell button. Yet the market kept advancing. Why? Because markets don't trade on today's headlines, they trade on what investors believe tomorrow is going to look like. And if they still believe that corporate earnings is going to continue to grow and innovation is going to continue, uh, uh, to be, and macro data continues to be robust, allowing the economy to weather the storms They'll keep buying. Yes, the headlines do create short-term chaos, but that's not a reason to panic necessarily. It is an opportunity though for the long-term investor that takes advantage of it. Ironically, the Wall of Worry though is actually healthy. It means that there are still skeptics out there, still cash sitting on the sidelines, and still investors waiting for the next pullback. As each fear fades, some of that money then ends up coming off the bench and finds its way into stocks. Helping to push the market higher and higher. Now, for those of you who did not buy into the fear trade, we're better off. And for those who made emotional decisions, well, you made an emotional decision. Remember, it's when everyone agrees— when everyone agrees that stocks can only go up— is really when you really need to start paying closer attention. Now, for the quarter, this is what it looked like. The Dow gained 13%, the best quarter since 2022. The S&P up 14.9%, the best quarter since 2020. The NASDAQ up 21.4%, the best quarter since 2020. The Russell gained 21%. Small caps finally coming to life. The equal-weight S&P up 11%, proof that participation broadened beyond just the mega-cap Mag 7 tech names. And the Mag 7, that was up about 18%. They regained leadership after that late May, early June sell-off, but they weren't the only winners. And that last point is probably the most important. Unlike 2023 and much of '24, the second quarter 2026 wasn't just another Mag Seven quarter. Leadership broadened considerably. Industrials, financials, transports, and small caps all participating. And that suggests a healthier bull market. With expanding breadth rather than one being carried by just a handful of stocks. Now for the quarter, here's how the 11 sectors performed, right, in the S&P. Tech up 31% off their April lows. Industrials up 14.5%. Consumer discretionary up 9%. Financials up 8.6%. Healthcare up 8.3%. Communications up 8%. Real estate up 7.6%. Basic materials up 1.6%. Consumer staples were down 0.3%. Utilities lost 1.2%, and energy, well, that suffered the worst, losing 14%. Now that was quarter performance, not year-to-date. Treasuries came under pressure yesterday. The TLT fell 1.2% and the TLH lost 9/10, pushing yields higher across the curve. Now for the quarter, the 2-year rose 31 bps to end the quarter yielding 4.17%. The 10-year added 16 bps to end the quarter yielding 4.46%, and the 30-year climbed 5 bps to yield 4.96. Now let's talk about oil. Remember, crude exploded higher early in the quarter as the war in the Middle East intensified, surging more than 22%. But by the end of the quarter, the entire move evaporated. Oil finished the quarter down 14.2% from where it began and nearly 29% below the May 15th high. A remarkable reversal. Why? Because the market is increasingly betting that a lasting agreement with Iran is going to hold. Keeping the Strait of Hormuz open, allowing oil and natural gas and fertilizers and other commercial products to move freely through the strait. This morning crude is trading at about $68.95, once again trying to break below the $70 trend line. If it does, I think the next stop is in the $62 to $65 range. And right now the path of least resistance is lower. The only thing likely to change that outlook would be a breakdown in the peace agreement uh, or renewed geopolitical tensions across that region. Now, gold is telling you a similar story. It's down 14% for the quarter and is under pressure again this morning, slipping another $25 to trade at $3,985 an ounce as geopolitical tensions cool and investors begin to consider the possibility that the Fed may need to keep rates higher for longer or even raise them. I don't think they're going to raise them, but that is still out there in the market. Remember, the market continues to price in one rate hike in the fall. And Bank of America, they think we're going to get three. I just wonder what that guy's smoking. And remember, higher rates mean a stronger dollar. And as we've discussed many times before, a stronger dollar typically puts pressure on dollar-denominated commodities like gold and oil. From a technical perspective, I wouldn't be surprised to see gold try to trade down towards $3,500. I've said this for the last couple of days. Before it finds meaningful chart support. Now let's turn to the economic calendar today. The first reports are already out, and that's the Challenger job cuts, and they came in down 4.5% year over year, suggesting companies are still reluctant to let workers go despite all this economic hand-wringing, right? At 7 o'clock, we're going to get mortgage apps, uh, followed by the June, um, uh, ADP employment report. Where the, where the economists are expecting private, uh, the private sector to have added 120,000 new jobs. That's the same for the NFP tomorrow. Remember, ADP is all— isn't a perfect predictive predictor for Friday's— for tomorrow's non-farm payrolls report, but it can certainly influence expectations. Now at 10 o'clock, going to get the ISM Manufacturing Index, expected to come in at 53.9, well into the expansion territory since anything above 50 signals growth. But don't get too hung up on the headline number. The real story is going to be in the prices paid component, which is expected to fall to 77.5 from 82.1. Why does that matter? Because it gives us one of the earliest looks at the inflationary pressures inside the manufacturing sector. If businesses are paying less for raw materials and inputs, that's another sign that pricing pressures are easing. A welcome development for the Fed and for consumers. It's— and for the bond market and ultimately for stocks. Now, so watch the headline, but pay closer attention to the prices paid component. That number could end up being the market mover, at least for today. Now let's be honest, the Fourth of July weekend is now upon us, and I suspect trading volumes are going to begin to thin out as more and more investors and asset managers head for the beach, the backyard barbecue, or the golf course. Price, right? Remember, lighter volumes can mean more volatility. With fewer buyers and sellers in the market, it takes less to push prices around. So here's my advice: if there are stocks that you'd be happy to buy on a pullback, or positions you're willing to sell or trim at higher prices, then put in those good till canceled orders, right? Those GTC orders. Put them in now. Let the market come to you instead of trying to be here chasing it. Then shut off the screens, Spend some time with your family and friends and enjoy the holiday and let Wall Street do what Wall Street does. The market, well, it's still gonna be here on Monday morning when you come back. European markets are all lower as the quarter begins. Germany is bucking the trend up 0.3%. US futures are lower this morning and that really should not be a surprise after the end of the quarter surge and the start of the long holiday weekend, right? I wouldn't put any effort into what's happening today. Dow futures down 106, S&P is down 12, the NASDAQ's down 100, the Russell's down 17. The S&P closed at 7,499, up 59 points yesterday. Trendline support is down at 7,378, and resistance at the, at the all-time high at 7,620. This morning we're turning the page on the quarter. It's now the Fourth of July, and before you know it, it's going to be Labor Day, Halloween, Thanksgiving, and then the Hanukkah and Christmas holidays. We are now deep into the midterm election season. We talked about this. The result will be what it's going to be. Investors just want certainty of whatever that is. Now, expect the rhetoric to heat up in the next couple of months. Expect the polls to shift. Expect every headline to create angst. Remember, history tells us that election years often produce volatility before they produce clarity. Now, we should all hope for gridlock because it limits any sweeping policy changes in either direction. Others, well, they're hoping for a complete political shift. But if that's your expectation, like I said yesterday, you're gonna have to wait until 2028. Either way, don't let politics dictate your portfolio. You want to build a plan, diversify appropriately, and manage your risk. Expect— you should expect more uncertainty and more volatility as we move into the fall. You can give me a call at 561-931-0190 to discuss your goals and your timeline. Let's assess the risk of your portfolio and your tolerance for volatility. And as usual, I'm happy to give you a complimentary portfolio review to assess what that risk is. Okay, so what do we have for dinner tonight? Well, it's another side dish for the barbecue. This time it's a watermelon and avocado salad, right? Versus the watermelon and tomato. You can use both, but this one's a new one and it's great. It's watermelon, it's avocado, red onions, cucumbers, feta cheese, and fresh mint. For the dressing, you need olive oil, fresh lime juice, minced garlic clove, and salt and pepper. You wanna make the dressing first. Whisk together all those ingredients and then emulsify it, set it aside. On a large platter, you should use this, a platter versus a bowl, 'cause it looks nicer. Arrange the cold watermelon cubes, the cucumber cubes, the sliced red onion, drizzle it with some of the dressing, some of the dressing. Then top it off with the feta cheese, the slices of avocado, and the fresh mint leaves. Then drizzle it with a little bit more of the dressing. Taste, adjust if you need to. Serve it immediately. It is delicious and it'll look beautiful on your barbecue table. Until tomorrow, take good care.
