July 1, 2026 · Michael Vodicka · 7 min read
The S&P 500 just closed its best quarter since 2020 and its best first half since 2021. Here’s the full recap for clients — June, the second quarter, and where things stand at the midpoint of the year.
Where the S&P 500 Stands at Mid-Year 2026
Six months ago, I was writing to clients about a 9% pullback, a spike in oil prices, and the opening days of a shooting war in the Middle East. If I’d told you back in January that the S&P 500 (SPY) would finish June up 9.6% for the year, I don’t know how many people would have believed me.
That’s exactly what happened. The index closed the first half of 2026 at 7,499, delivering a 14.9% gain in the second quarter alone — the strongest three-month stretch since the pandemic recovery of 2020. Add it up, and the S&P is now positive 9.6% year-to-date, sitting just below its all-time high of 7,621 set on June 2. Let me walk you through how we got here, and why I still like what I see heading into the second half.
S&P 500 Monthly Returns — 2026 YTD
A rocky start gave way to the best quarter the index has seen in six years.
+0.9%
-0.5%
-4.3%
+10.4%
+5.1%
-1.1%
★ Largest monthly gain since November 2020. Source: S&P Dow Jones Indices, FactSet.
Notice the shape of that chart: a weak first quarter, then three straight months of gains. April was the turning point — the best month since 2020 — and May and June built on it. Even June’s dip, which had some clients asking questions mid-month, closed out mild once the dust settled. That’s the story of the first half in one picture: a market that got knocked down early and spent the next three months getting back up.
3 Reasons the S&P 500 Had Such a Strong First Half
A run like this doesn’t happen by accident. Three forces did the heavy lifting — and all three are still in play heading into the second half.
1 Earnings Kept Delivering, Quarter After Quarter
This is the engine behind everything else. S&P 500 earnings grew roughly 28% in the first quarter — the fastest pace in years — and analysts have since raised their second-quarter estimate to 23.1% growth, up from 18.8% at the start of the quarter. Technology and communication services companies are leading the way, and AI-related capital spending from the largest tech companies is now projected north of $700 billion for the year. When earnings estimates keep getting revised higher instead of lower, stock prices tend to follow.
2 The Middle East De-escalated
The single biggest weight lifted off the market this year was progress on the Iran conflict. The U.S. and Iran signed a memorandum of understanding in mid-June aimed at winding down the four-month-old war, and oil prices pulled back sharply from their early-year highs. That mattered enormously — a big chunk of the inflation anxiety that hung over the market in Q1 traced directly back to energy prices. As that risk eased, investors stopped pricing in the worst case, and the market did what it tends to do when disaster is taken off the table.
3 The Rally Broadened Well Beyond Big Tech
This is the part I find most encouraging. The Russell 2000 small-cap index gained roughly 22% in the first half — its best six months since 1991 — and every sector of the S&P 500 is projected to post revenue growth this year. The consumer stayed strong too: Walmart and Costco both posted healthy sales growth through the spring. When gains are this broad-based, rather than resting on a handful of mega-cap names, the rally tends to have sturdier legs under it.
S&P 500 Earnings Growth Is Accelerating
Year-over-year EPS growth — Q1 actual, Q2–Q4 consensus estimates
+27.9%
+23.1% (E)
+26.7% (E)
+24.3% (E)
Source: FactSet Earnings Insight, week of June 26, 2026. (A) = actual. (E) = consensus estimate.
3 Reasons to Stay Bullish for the Second Half of 2026
A strong first half naturally raises the question of whether the easy gains are behind us. I don’t think they are. Here’s why I like the setup heading into the back half of the year.
1 Earnings Are Set to Keep Climbing
Look back at the chart above: analysts expect Q3 and Q4 earnings growth of 26.7% and 24.3% — both higher than the second quarter. Full-year 2026 earnings growth is now projected at roughly 24%, among the strongest years in over a decade. The engine that powered the first half hasn’t just held up — it’s expected to keep accelerating.
2 The Calendar and the Fed Are Both on Our Side
2026 is a midterm year — historically the choppiest stretch of the four-year presidential cycle, but also the launching pad for the strongest twelve months that typically follow. We’re already six months into a midterm year that’s up nearly 10%, well ahead of the historical script. Layer on growing expectations for Federal Reserve rate cuts in the back half, and the tailwinds start to stack up in our favor.
3 The Market Keeps Proving Its Resilience
This market absorbed an active war, a sharp tech-led pullback in early June, and stretched valuations — and it still ground its way to new highs by quarter-end. The Dow, Nasdaq, and Russell 2000 all posted their best first halves in years right alongside the S&P. Markets that shrug off bad news and keep climbing tend to keep climbing.
It Wasn’t Just Tech — First Half 2026 Index Returns
Small caps led, but every major benchmark posted a strong first half.
+8.9%
+9.6%
+12.8%
+22.0%
Price returns through June 30, 2026. Source: S&P Dow Jones Indices, Nasdaq, FTSE Russell.
2 Reasons to Stay Cautious
Now let me put on my skeptic’s hat for a moment — that’s my job, not just to cheerlead.
1 Valuations Are Stretched, and Leadership Is Narrow
The market is trading around 20 times forward earnings, above its 10-year average. Strip out AI-related and energy spending, and underlying earnings growth looks far more modest. When a market leans this heavily on one theme, any wobble in AI enthusiasm — like the chip-led pullback we saw in early June — can hit harder than it should.
2 The Middle East Isn’t Fully Resolved
The memorandum of understanding was real progress, but tensions have flared more than once since — including reports as recently as late June of a possible ceasefire violation. Oil remains a wildcard, and geopolitics has a way of not cooperating with a portfolio’s plans on a set schedule.
“Six months ago, the headlines were bracing for a rough year. The clients who tuned that out and stayed invested are sitting on a 9.6% gain and the best quarter since 2020. That’s not luck — that’s discipline.”
What to Expect Moving Into the Second Half
After a half this strong, it would be normal to see some consolidation — markets don’t move in a straight line, even in great years. But the bigger picture is what matters: earnings are accelerating, not slowing, the rally has broadened well beyond a handful of mega-cap names, and the calendar and the Fed both lean in our favor from here. The ingredients for a solid second half are on the table.
I’m not making major changes to client portfolios. The playbook that worked through Q1’s turbulence hasn’t changed: stay invested, stay diversified, and let the engine of corporate earnings do the heavy lifting. Six months in, that approach has paid off. I expect it to keep paying off through the back half of the year.
Related Reading from Vodicka Group:
→ S&P 500 June 2026 Update: A Quiet Month and a Calendar That’s Turning
→ S&P 500 April 2026 Update: A Blockbuster Month & 3 Reasons to Stay Bullish
→ S&P 500 Q1 2026 Update: Through the Storm, Into Clear Skies
→ Schedule a Free Portfolio Review
As always, if my outlook changes, my clients and readers will be the first to know. I’ll be back with another update soon — have a great week!
Until next time,
Michael Vodicka
Founder & Lead Advisor · Vodicka Group
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
