The truce between the US and Iran came under severe stress over the weekend with both sides firing on one another and each blaming the other. But there was some geopolitical de-escalation on Monday that pushed stocks higher to start a holiday-shortened week, despite interest rates climbing steeply on the back of ongoing Fed rate hike fears.

There was a flurry of Supreme Court decisions, including upholding the concept of birthright citizenship, confirming the US president as an adjudicated sex offender, opening the door to unconstrained electoral spending by political parties and - more importantly for Wall Street - restricting presidential ability to fire Federal Reserve officials on a whim, somewhat calming recent growing fears about central bank independence.

Tech bargain-hunters dipped their toes back into the water and the major indexes snapped their five-day losing streak with some solid gains.

The month, the quarter and the first half of 2026 came to a close on Tuesday with oil prices dipping below $70 and stocks continuing their rebound from the difficult previous week, led by more Big Tech/AI buying.

It can be difficult to trust pricing around key calendar dates like this because of fund manager window dressing, but what is not in doubt is that we had just experienced the best quarter for the S&P 500 (up by 15%) since the big COVID bounce of 2020 and the NASDAQ’s second-best quarter (up 21% despite a record volume one-day fall just last month) since its recovery from the dot-com crash of 2001.

See my Q2 Market Review

That said, financial markets are now entering what historically risks being the poorest-performing quarter of the year, even though markets do still rise about two-thirds of the time in Q3, including last year which saw a 7.5% jump in the S&P 500.

July, Q3 and H2 kicked off on Wednesday with a snoozer. Attention was mostly focused on readying for the employment data the next day. The indexes all lost a bit of ground, even though a lot more S&P 500 stocks rose than fell over the course of the session.

Another bout of chip stock selling put Asian stocks on the back foot on Thursday. The latest pre-market US Jobs Report was generally a disappointment with considerably lower job creation than expected last month and downward revisions to previous data, although the unemployment rate fell slightly to 4.2% as the size of the entire labor force contracted.

Wall Street liked the idea of the Fed having a bit of breathing room when it comes to maybe having to raise the Fed Funds Rate and interest rates eased back from their early week spike as traders pared back on bets on any imminent hike (see INTEREST RATE EXPECTATIONS below).

Stocks initially moved higher but then fell back again on renewed tech weakness. Volume was muted ahead of the long holiday weekend and the indexes ended the day little changed, but mostly higher for the shortened week.

Some other things I’m thinking about ..

* By many measures we just entered the eighth longest bull market in stocks since the Second World War at just over three and a half years. Of the previous seven, the average total length is around seven years with the shortest being about five years. We may have a way to go ..

* According to the Federal Reserve, the top 20% of earners now account for 58% of all personal spending in the US, the highest proportion on record. Consequently, the bottom 80% of earners account for just 42%, the lowest on record. To put this into perspective, in the 1990s these groups accounted for roughly equal proportions of total personal spending at around 50% each. The K is getting steeper.

* Iran is becoming more and more vocal about its intent to monetize the Strait of Hormuz using a toll system whenever it properly reopens, something it only figured out how to do after being attacked by the US. This is raising the stakes and adding complication when it comes to negotiations.

If you are not yet a financial planning or investment management client of Anglia Advisors and would like to explore becoming one, please feel free to reach out to arrange a complimentary no-obligation discovery call with me.

ARTICLE OF THE WEEK ..

“All sorts of crazy economic ideas are being taken seriously lately.” Bloomberg’s brilliant Allison Schrager bemoans the dubious idea of AI and government hooking up.

.. AND I QUOTE ..

“Those numbers are too high.”

Tom Barkin, President of the Federal Reserve Bank of Richmond and voting member of the Federal Reserve rate setting committee, referring to US inflation data. The Fed traditionally combats growing inflation by raising interest rates.

LAST WEEK BY THE NUMBERS:

Last week’s S&P 500 market color courtesy of finviz.com

* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. It rose 1.7%% last week, is higher by 13.9% over the last three months and is up 9.8% so far this year.

* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. It fell 0.1% last week, is higher by 18.7% over the last three months and is up 21.4% so far this year.

* VXUS, an International Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. It rose 0.1% last week, is higher by 10.0% over the last three months and is up 13.1% so far this year.

Data shown is total return (including dividends)

INTEREST RATES:

* FED FUNDS RATE * 3.625% (unchanged from a week ago)

* PRIME RATE ** 6.75% (unchanged from a week ago)

* 3 MONTH TREASURY 3.82% (3.83% a week ago)

* 2 YEAR TREASURY 4.14% (4.08% a week ago)

* 5 YEAR TREASURY 4.23% (4.12% a week ago)

* 10 YEAR TREASURY *** 4.49% (4.38% a week ago)

* 20 YEAR TREASURY 4.99% (4.87% a week ago)

* 30 YEAR TREASURY 4.98% (4.87% a week ago)

Data courtesy of the Federal Reserve and the Department of the Treasury as of Friday’s market close.

* Decided upon by the Federal Reserve Open Market Committee at periodic meetings 8x a year. Used as a basis for overnight interbank loans and for determining high yield savings interest rates.

** Wall Street Journal Prime Rate as of Friday’s close. Tending to move in lockstep with the Fed Funds Rate, this measure is used as a basis for determining certain consumer loan interest rates such as credit cards, auto loans, personal loans, home equity loans/lines of credit and securities-based lending.

*** Used as a basis for determining mortgage interest rates.

AVERAGE 30-YEAR FIXED MORTGAGE RATE:

* 6.43%

One week ago: 6.49%, one month ago: 6.49%, one year ago: 6.67%

Data courtesy of the Federal Reserve Bank of St. Louis.

INTEREST RATE EXPECTATIONS:

Where will the Fed Funds interest rate be after the next rate-setting meeting on July 29th?

* 0.25% higher than now .. 18% probability (30% a week ago)

* Unchanged from now .. 82% probability (70% a week ago)

* 0.25% lower than now .. 0% probability (0% a week ago)

With four more rate-setting meetings this year, what is the most commonly-expected number of remaining Fed Funds interest rate changes in 2026?

* One increase, 42% probability (a week ago: one increase, 42% probability)

Data courtesy of the CME FedWatch Tool and is derived from futures market pricing as of Friday’s market close based on the current Fed Funds interest rate of 3.625%.

PERCENT OF S&P 500 STOCKS ABOVE THEIR OWN 200-DAY MOVING AVERAGE:

* 66%

One week ago: 64%, one month ago: 53%, one year ago: 42%

Data courtesy of barchart.com as of Friday’s market close.

This widely-used technical measure of market breadth is considered to be a very robust indicator of the overall health of the S&P 500 index.

A high percentage (above 70%) generally suggests broad market strength and a bullish trend, while a low percentage (below 30%) may indicate market weakness and a bearish trend.

FEAR & GREED INDEX:

“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffett.

Data courtesy of CNN Business as of Friday’s market close.

The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.

Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.

Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.

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