Market Pulse: Q2 2026
When Headlines and Markets Don’t Match
Just for fun, let’s imagine someone (we’ll call him Patrick) has been living under a rock, completely oblivious to current events and news headlines over the past few months. Curious about his investment portfolio, Patrick decides to crawl out from under the rock and drive to the local internet café to see how the stock market is performing this year.
On the way, he stops for gas and does a double take. Prices are more than 40% higher than the last time he filled up. That can’t be good, he thinks. Drawing on the invaluable insights from his advisor’s newsletters (which he absolutely reads from beginning to end), Patrick recalls that sharp increases in oil prices tend to be a headwind for stocks. Oil is a core input across nearly every industry. When crude rises, businesses face higher costs for energy, transportation, and raw materials. Those costs often get passed on to consumers, fueling inflation.
As he stands at the pump, Patrick’s thoughts begin to spiral. Higher inflation can lead to higher interest rates for longer. Higher rates increase borrowing costs, pressure corporate profits, and can weigh on stock valuations. By the time he gets back in the car, he’s feeling increasingly uneasy about what he might see when he logs into his account.
Hoping for a distraction, he turns on the radio. Instead, it makes things worse. The headlines are relentless. Geopolitical conflict, supply chain disruptions, tariffs and trade tensions, stress in private credit, concerns about artificial intelligence displacing jobs, potential rate hikes, stagflation fears, and predictions of an imminent recession.
Now convinced his portfolio must be in rough shape, Patrick arrives at the internet café. As he logs in, he’s already preparing what he’s going to say to his advisor. “How could you keep me invested in stocks with all of this going on? Don’t you pay attention to the news?”
The screen loads. Patrick pauses.
His balance is higher.
The market is near an all-time high.
He refreshes the page; certain it must be a mistake. Same result.
Despite everything he just saw and heard, the market hasn’t collapsed. In fact, it has moved higher.
Relieved, and a bit humbled, Patrick heads back home. Along the way, it finally clicks that markets don’t simply follow the tone of the headlines, something his advisor has been trying to tell him in those newsletters all along. If anything, reacting to the constant stream of alarming news might have led him to make emotional decisions at exactly the wrong time.
By the time he settles back in, Patrick reaches a clear takeaway. Successful investing is not about reacting to every headline, but about maintaining discipline and perspective. Staying committed to a long-term plan, rather than getting caught up in short-term noise, is often what leads to better outcomes.
Second Quarter Market Update
While Patrick’s story highlights the importance of tuning out short-term noise and staying committed to a long-term investment plan, it does simplify what has taken place in the stock market so far this year. To put things in proper context, let’s begin with a recap of the first three months.
A Familiar First-Quarter Pattern
In January, the S&P 500 gained 1.4% as companies and investors appeared to settle into what looked like a relatively stable tariff environment. That stability proved short-lived. In February, the index declined 0.9% as several notable events emerged at once, including elevated PPI inflation for January, a weaker than expected final reading on fourth quarter 2025 GDP, and the Supreme Court’s decision to overturn IEEPA based tariffs.
March brought a much sharper shift in sentiment. The S&P 500 fell 5.1% as geopolitical tensions escalated, including conflict with Iran and the effective closure of the Strait of Hormuz. Energy markets reacted quickly, with U.S. crude, gasoline, and diesel prices rising 40 to 50% in a single month. For the quarter, the S&P 500 declined 4.6%. Losses would have been even steeper if not for a nearly 3% rally on the final day of March, driven by optimism that the conflict might begin to de-escalate.
Interestingly, the pattern in early 2026 closely mirrored what we saw a year earlier. Both periods featured a positive January, a modest pullback in February, and a more pronounced decline in March. In fact, the S&P 500 experienced the same 4.6% decline in the first quarter of 2025. The key difference lies in the catalyst, as last year’s weakness was largely driven by anticipation of “Liberation Day” tariffs.
What Last Year’s Selloff Can Teach Us
April is where the paths begin to diverge. Last year, the market decline accelerated early in the month, with the S&P 500 ultimately falling 19% from its peak. Much of that drawdown was driven by a sharp four-day selloff in which the index dropped roughly 12%, marking the 12th largest four-day decline since 1950. While moves of that magnitude can be unsettling, history suggests they have often been followed by strong forward returns. That pattern held true in this case, as the S&P 500 gained 38% over the subsequent twelve months.
Source: Creative Planning
Sharp market declines are often accompanied by a surge in the Volatility Index (VIX), a widely followed measure of investor sentiment and market stress. Last year was no exception, as the VIX spiked to 52.33 on April 8, coinciding with the market’s low. Historically, extreme readings like this have tended to mark periods of peak fear rather than the beginning of prolonged declines. Since 1990, there have been 75 instances where the VIX closed above 50, and in each case, the S&P 500 delivered positive returns over the subsequent one-, two-, three-, four-, and five-year periods.
Source: Creative Planning
Why Staying Invested Matters
One of the most important lessons for investors is that the market’s strongest gains often occur very close to its sharpest declines. Periods of extreme volatility tend to produce rapid reversals, and emotional reactions to steep losses can lead investors to miss the subsequent recovery, ultimately harming long-term results.
April provided a clear example of this dynamic. On April 8, 2025, sentiment was deeply negative, and it felt as though the market’s decline had no end in sight. Yet just one day later, the S&P 500 experienced one of its strongest single-day rallies on record, following the announcement of a pause on the reciprocal tariffs introduced the week prior.
Although the magnitude of the move on April 9 was more extreme than most, sharp rebounds like this are not uncommon, particularly during periods of elevated volatility. Historically, many of the market’s strongest days have occurred amid peak uncertainty and often near market lows, reinforcing the importance of staying invested through periods of heightened volatility.
Source: Creative Planning
The reason for revisiting last year’s events is simple. Periods that feel the most uncomfortable are often the ones that present the greatest opportunity. When sentiment is at its worst, the foundation for future gains is often being set, even if it is not yet visible.
A Fast Recovery in 2026
Turning to this year, April followed a somewhat similar pattern, though with less intensity. Peak pessimism occurred at the end of March, when the VIX moved above 30, elevated but still well below the extremes seen last year. At that point, the S&P 500 had declined 9.8% from its February high.
From there, sentiment began to shift. On March 31, markets responded positively to growing optimism around a potential de-escalation of the conflict with Iran. Over the following three weeks, the S&P 500 gained nearly 12%, while the VIX experienced one of its sharpest declines in recent memory. As we saw in 2025, this combination of falling volatility and improving market performance following a period of heightened uncertainty has historically been a constructive signal for forward returns.
Source: Creative Planning
What distinguishes the current rally from the others listed above is its timing, as it is the only instance that has not occurred during a bear market or in the immediate aftermath of a bear market low.
Markets Are Moving Faster
After a turbulent March and April, marked by sharp swings and a steady stream of negative headlines, where does the market stand today? Surprisingly, almost exactly where a typical year would suggest at this point in the calendar.
Source: Charlie Bilello
It continues to be remarkable how resilient the market has been, particularly given the speed of recent recoveries. The conflict with Iran began in late February. Within a matter of weeks, the S&P 500 had fallen nearly 10%. Just as quickly, those losses were erased, with the market rebounding to new all-time highs in short order.
This marks the first time in the past 100 years that the S&P 500 has reached new highs within 11 trading days or less after experiencing a 5 to 10% decline. Markets are often described as taking the stairs up and the elevator down. In recent years, however, the pattern has looked more like an elevator down followed by an equally rapid move higher.
The number of V-shaped recoveries over the past decade highlights just how quickly sentiment can shift.
Source: YCharts
We saw this pattern play out after the late 2018 mini bear market. It repeated following the Covid crash in 2020, which marked the fastest return to new all-time highs after a 30% plus decline in market history. It occurred again after Liberation Day, and most recently during the Iran conflict. The one notable exception was the 2022 inflation-driven selloff. Even then, the decline was more characteristic of a typical non-recessionary bear market rather than a prolonged downturn.
Over the past decade or so, everything has sped up, and it is not limited to the stock market. Following the brief Covid recession, the economy experienced the fastest labor market recovery on record. The unemployment rate moved from 3.5% to nearly 15%, and then back down to 3.5% in just two years.
Source: YCharts
The pandemic also gave rise to one of the strongest labor markets on record. Job openings surged from roughly 7 million prior to the pandemic to more than 12 million at the peak of the labor market craziness. And now, the labor market has cooled down again, highlighting just how quickly conditions can change. In a remarkably short period, workers went from having significant leverage in 2021 and 2022 to growing concerns that artificial intelligence could displace millions of jobs.
Source: YCharts
The oil market has experienced an even more dramatic ride throughout the 2020s. Prices fell from roughly $60 per barrel at the end of 2019 to negative $37 in early 2020, before surging to more than $120 following the Russia-Ukraine conflict. Prices then retraced sharply, dropping to around $55 late last year, only to spike again above $120 at the onset of the Iran conflict. Today, prices have settled closer to $90.
Source: YCharts
What about interest rates? The federal funds rate remained near zero for much of the 2010s in the aftermath of the Great Financial Crisis and the slow economic recovery that followed. The Federal Reserve began to normalize policy toward the end of the decade, but that effort was interrupted by the trade war, and then completely reversed when Covid pushed rates back to near zero once again. Once inflation surged, Jerome Powell and the Federal Reserve responded with one of the most aggressive tightening cycles in history, raising short-term rates from near zero to more than 5% in just over a year.
Source: YCharts
The 30-year mortgage rate rose from below 3% at the end of 2021 to roughly 8% by the fall of 2023. It is now sitting just above 6%.
Source: YCharts
Inflation followed a similarly rapid path, moving from subdued levels to multi-decade highs and now back toward more typical ranges, all within just a few years.
Source: YCharts
Of course, beyond the pandemic itself, one of the primary drivers behind many of these shifts was the scale of government stimulus introduced during this period. The challenge with moves like these is how difficult they can be to process in real time.
One of the reasons consumer sentiment has remained subdued in recent years is the speed of the changes. Prices and mortgage rates moved higher so quickly that many households had little time to adjust. A rapid jump in everyday costs, such as gasoline rising from $3 to $4 or even $5 per gallon, can feel like a shock to the system.
It is also important to recognize that markets will not always recover in a V-shaped fashion. At some point, there will be a financial crisis or recession that leads to a more prolonged downturn. The labor market will not always rebound this quickly, and interest rates will not always move across such a wide range in such a short period of time.
While many of these extreme moves can be traced back to the pandemic and its aftereffects, the broader takeaway may be more structural. We appear to be operating in a world where markets move faster, influenced by the speed of information and government intervention. That dynamic is likely here to stay.
Why the Economy Feels Different Than the Market
Back to Patrick. He is not alone in wondering how Wall Street is celebrating like it’s a boom year, while Main Street feels stuck in a very different reality. The S&P 500 continues to push to new all-time highs, even as consumer sentiment is at an all-time low. The gap between how markets are performing and how consumers are feeling is as wide as it has ever been.
Source: YCharts
Even when the market seems difficult to make sense of, it is important to remember that over the long term it has historically always trended higher.
Source: Peter Mallouk
Investing at All-Time Highs
There will always be a wall of worry to climb, along with a vocal group of skeptics pointing to a range of plausible and often well-reasoned risks that could derail the market’s ascent. Bull markets do not typically end because of widespread fear. More often, they run their course when the last remaining skeptics capitulate, when fear of missing out gives way to greed, and when the final marginal dollar is pulled into the market. We do not believe we are at that point yet.
When markets are setting new highs, as they are now, is it a risky time to invest? History would suggest not. Since 1989, investments made at all-time highs have, on average, actually outperformed those made on any given day. Putting money to work at the market peak shouldn’t be the main concern investors have. Rather, a bigger risk is staying on the sidelines or selling out of fear and missing the market’s best days, which can have a significant impact on long-term returns.
Source: Peter Mallouk
Discipline Over Retreat
While there will always be reasons to feel uneasy about the market, it is important to recognize that several factors continue to support equities. Large tax refunds and sustained spending by higher income households are helping to cushion consumption, while corporate fundamentals remain solid, with S&P 500 earnings still expected to grow. Capital investment in technology and infrastructure continues to drive productivity gains, and despite recent volatility, inflation expectations remain well anchored.
Perhaps most importantly, innovation, from the adoption of artificial intelligence to efficiency improvements across industries, continues to enhance long-term growth prospects. Taken together, these dynamics serve as a reminder that periods of uncertainty often coexist with meaningful opportunity.
For investors, this environment does not call for retreat, but for discipline and perspective. Maintaining a focus on quality, diversification, and long-term structural drivers remains key as markets navigate near-term uncertainty. As always, we remain committed to helping guide you through both challenges and opportunities with clarity and discipline.
Sincerely,
Robert Yarmak, CFA®
Chief Investment Officer / Portfolio Manager
If you would like to discuss your portfolio or have questions about how your investments align with your long-term financial plan, please reach out to your wealth advisor.
Disclosures
Vertrix Wealth Management, LLC is an SEC-registered investment adviser. The information contained in this newsletter is provided for informational purposes only and should not be construed as personalized investment advice or a recommendation to buy or sell any security. All investments involve risk, including the possible loss of principal. Past performance is not indicative of future results. Views expressed are those of Vertrix as of the date of publication and are subject to change based on market and other conditions. Advisory services are offered only pursuant to a written agreement. For additional information about our services, please refer to our Form ADV, available at www.vertrixwm.com or upon request.
