2nd Quarter Recap
There’s an old card players’ rule: the deck doesn’t remember who won the last hand. Markets needed that reminder in the 2nd quarter, and for a while, nobody wanted to hear it. The 2nd quarter marked a dramatic reversal from the geopolitical anxiety that opened the year.
Fueled by AI infrastructure spending, solid corporate earnings, and healthy consumer spending, US equities posted the strongest quarter in six years. Growth stocks significantly outperformed value, supported by technology, marking a sharp reversal from the first quarter. Corroborating this claim, the semiconductor sector now accounts for 20% of the S&P 500, up from 3% for most of the last 15 years. The technology sector overall now represents a whopping 39% of the large-cap index, with the same trend happening downstream in mid- and small-cap benchmarks.
International developed markets continued building off a torrid 2025 through the first quarter, only to cool off in Q2. Key drivers included Europe’s outsized reliance on imported oil and gas, along with a weakening Euro. Emerging markets, however, were able to look through much of the volatility and continued outsized gains in the 2nd quarter. It’s no coincidence, that the AI buildout supported Asian technology markets, notably Taiwan and South Korea, given their central role in global semiconductor and memory chip supply chains.
What’s Next
Looking ahead, market direction will likely remain sensitive to the path of inflation, developments in the Middle East, and the durability of earnings growth, particularly in the AI driven sectors. The macroeconomic backdrop reflects a slowing yet resilient economic environment. Inflation has reaccelerated over the past quarter, driven in part by energy shocks tied to Middle East conflict.
Meanwhile, domestic consumer spending is showing signs of fatigue as elevated costs weigh on purchasing power. The domestic labor market continues to show signs of stability, with unemployment holding steady. Consequently, the Federal Reserve has held interest rates at restrictive levels. As such, it remains prudent for investors to monitor evolving economic and geopolitical conditions and maintain a disciplined, long-term strategy.
Our Recommendations
Hot hands, in our experience, revert to the mean more reliably than most people expect. We are not predicting when the hand ends, only that it will, and that the players still standing tend to be the ones who never confuse a streak for a strategy.
Schedule a comprehensive review meeting or a quick check-in to help ensure your financial plan is aligned with investment strategy. With significant shifts in the equity markets, as noted earlier, managing concentrated allocations is a key element of risk exposure.
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Quarterly Commentary
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Suken Jogani
Founder – Managing Director
Theodore (TJ) Zak, CFP®, AIF®
Founder – Managing Director
Anthony Juliano, CFP®
Founder – Wealth Advisor
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Disclosures
&Partners did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of &Partners or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Please consult with your financial professional to determine what might be appropriate for your situation. Past performance is not indicative of future results.
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