Quarterly Update

The market rebounded sharply from the sluggish first quarter despite the ongoing war in the Middle East and the resulting resurgence of inflationary pressures. In one of the best quarters on record, the S&P 500 gained 15.2%, the Nasdaq Composite surged 21.6%, and the Russell 2000 jumped 21.49.%. Crude Oil prices sank almost 30% to finish below the prewar level at just over $70 per barrel, having peaked at nearly $115 per barrel in early April. There was dramatic dispersion in results across sectors, with the Technology sector skyrocketing 43.5%, while the Oil & Gas sector slumped 12.69%. In the previous quarter, it was the exact opposite, with Oil & Gas stocks at the top and Tech stocks at the bottom. Growth stocks outperformed value stocks by a wide margin across all market-cap ranges.

Cryptocurrencies continued to nosedive, with Bitcoin declining to its lowest level since August 2024. Gold prices also dropped sharply, finishing at around $4,000 per ounce, wiping out all the 30% rally that started last fall. The Dollar inched slightly higher, reaching its highest level since the spring of 2025.

Interest rates steadily climbed in the first half of the quarter, peaking at 4.69% on May 19th before stabilizing and trending lower for the rest of the quarter, finishing at 4.41%. At Kevin Warsh’s first meeting as Chairman, the Federal Reserve kept its benchmark interest rate unchanged at 3.50%–3.75%. Warsh’s first meeting had a hawkish tone as he highlighted that the Fed’s primary focus was on price stability. As such, the Fed is likely to continue standing pat until the effects of the war become clearer. Thus far, the economy has shown great resilience, with record corporate earnings, the unemployment rate holding steady at 4.3%, hiring also coming in above expectations, and job openings hitting a five-year high. Our base case remains that 2026 should show those trends continuing, with a huge asterisk due to geopolitical uncertainties.

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