Q2 2026 MARKET COMMENTARY
The second quarter of 2026 saw equity indexes rally aggressively on the back of what proved to be one of the best rounds of earnings reports in quite some time. While earnings were very good for companies in a wide swath of industries and sectors, stock returns were largely centered on technology companies; specifically, technology companies that are receiving unprecedented spending from the large US Hyper scalers as they feverishly look to build out computing infrastructure to support AI (On top of growth from Cloud). Markets were also bolstered by a ceasefire between the US, Israel and Iran during the quarter. Here in July, we know that the ceasefire is no longer in force which will now create added uncertainty for markets again as we enter Q3. As we wrote last quarter, with midterm elections slated for November of this year, we would have expected President Trump to be focused on US domestic agenda – instead he’s now in a protracted conflict with an adversary that is not held to any timelines. Our concern is that a deal may be hatched that provides expediency to end the conflict for the US but results in a worse situation longer term in regard to Iran’s ability to 1) Tie up shipping in the Strait of Hormuz 2) Fund it’s proxies in the region and 3) Continue to pursue its nuclear ambitions… my concern is that with the overwhelming military force that has come to bare against them, the need for #3 only becomes more critical to those in power. We continue to be surprised at how fast oil prices have collapsed globally given the fact that we do not have a resolution with Iran & Ukraine is now attacking energy assets deep within Russia – we’ll see whether these prices reassert themselves in Q3. On the domestic front, the fear that AI is coming for everyone’s job has not come to fruition yet. The job market remains surprisingly firm which, if it continues, could bode well for consumer spending into year end.
Equity
We’ll lead off with Public Equities as it’s the most talked about area of investing and relevant to just about every investor in our practice. YTD through Q2, the S&P 500 rebounded to up +9.6%. The Nasdaq, also rebounded and was up +12.79%, and the Russell 2000 which represents US small caps, was up +22.6%.[1]
Our philosophy around owning Public Equities has encompassed the following 1) Focus on owning high quality businesses (Strong balance sheets and profitability) 2) Look to invest in businesses that exhibit pricing power due to limited competition 3) Look for businesses that are durable that can survive hard times– stock prices go up and down, but a durable business won’t go bankrupt and will increase in value over each economic cycle 4) Where we feel we have competency, own the individual companies, where we don’t, utilize a passive basket like an ETF or active management through a mutual fund.
A recent, very large IPO of a space-related company echoes the point. The company came to market looking to sell 85 billion dollars in stock, a record by almost 3x the amount of capital ever raised in a public debut, and still it was 4x oversubscribed – which means over 340 billion of capital was interested in purchasing stock in a company trading at 94x sales and losing money. The story is amazing, and their access to space for the moment makes them a unique property for sure, but when investors are willing to own an asset at seemingly ANY price, doesn’t this feel far more like speculation/gambling than investing? In our view, risk management is beginning to go out the window when we start to see these kinds of events. Does it mean we are at a top? We don’t know, and we aren’t going to make that call, but these are the kinds of events historically that only happen when risk appetite is so high that it leaves room for some sort of “accident” to shock markets and cause meaningful corrections, because no one’s expecting anything bad to happen.
The IPO supports the point the amount of liquidity in the system currently is absolutely massive to absorb such a large offering. Finding great profitable businesses has become less important than being in the right area of the market and capturing flows. Clearly companies don’t need to generate profits, they just need to be in the path of where the liquidity is flowing. This brings us to our next point – perhaps we have made our approach to equity investing too narrow. Owning individual stocks which has worked well for us over the years is akin to going fishing with a pole and bait – while you’re most likely to catch the right fish, you may at times not catch anything. As opposed to using ETFs which represent baskets of stocks or indexes which represent hundreds if not thousands of stocks – it’s akin to going fishing with a large drag net – you may not catch everything that you want to, but your odds of catching fish (IE. Flows of liquidity) go up substantially. We can lament markets for not acting the way we want to, or we can adjust our strategy to try and catch more of those flows – and that’s what we’ll be looking to do. A couple of ways to go about it will be the following 1) Make sure we have full allocations to large/important individual stocks in the market that will receive flows from multiple indexes and continue to fit our parameters for investment 2) Incorporate more sector/themed ETFs into our mix, we don’t need to own the best name, we just need to be in an area/theme that we know is receiving flows 3) Utilize some indexes as part of our mix – to start we’ll be adding them into our international portfolio between developed and emerging markets (We’ll size down our global mutual fund to help facilitate this broader approach to the market).
While the market was chasing technology hardware aggressively in Q2, it was absolutely throwing out hard assets/commodities – specifically in the metals/mining space. We think areas like gold, copper, uranium and other important metals will be searching for a bottom during Q3. Given the proliferation of money printing by the US and other profligate spenders, we continue to believe that clients need to own these assets as a long-term hedge to preserve their purchasing power. The only way we can see servicing these mountains of debt will be to debase paper currency as the release valve in the global financial system.
The IPO market and deal making started to pick up in Q2. While we like the progress of deal making, we are seeing in Private Equity and believe in owning private companies in addition to public companies, we are still on hold of adding new capital to the space. Specifically, there are a number of privately held software companies in private equity portfolios that are still feeling their way through the current environment that could see AI as an enabler or a competitor.
Real Estate
Returns in Commercial Real Estate continued their positive momentum from the end of 2025 into midyear 2026. We have consistently shared with clients that we were seeing a turn to the positive in this area of the market and have been encouraging new investment for clients that we felt are under-represented in this space. One item we need to continue to watch is the rise we’ve seen in interest rates. When the Iran conflict kicked off the 10 yr. US Treasury was around 4% but in recent weeks, we’ve seen that rate move higher into the mid 4.5% area. Our expectations coming into the year were that rates would either hold or move lower throughout 2026, not move higher. While it’s possible these rates may move lower once the Iran conflict concludes, there are no guarantees that they will do so if inflation expectations remain elevated. For now, we are hopeful that interest rates will only prove to be neutral for the Real Estate sector rather than a
headwind in 2026.
Infrastructure has been a bright spot and has met or exceeded our expectations since adding it to client portfolios in early Q1 of this year. Investments in AI Data Centers (A cross over asset between infrastructure and commercial real estate) are driving hundreds of billions of dollars into this space. In addition, as local communities are voting down constructing new data centers in their towns and cities for fear of rising electricity bills, projects that are now getting approved are being required to provide their own dedicated power which means additional investment into the power section of infrastructure. We think Infrastructure has a long investment tail, attractive returns and most importantly provides an absolutely non-correlated return stream to their portfolio. If/when equity markets decide a negative rerating is at hand, these infrastructure investments will help to soften some of that blow
Debt
Debt markets, normally the most boring part of a client’s portfolio, have received more intention than we would like to start the year. Rates have bounced around, but they are generally on the rise globally. When we think about what might end the party for risk assets we find it interesting that not many investors are talking about higher interest rates. Mind you, we are not at all looking forward to the prospect of higher rates – in 2022 we were reminded how destructive they can be to portfolio values as they pulled down US stock indices aggressively, ended the upward trajectory in the Commercial Real Estate market which led to a two year draw down in 2023/2024 and created the worst bond market returns in 40 years in the US. For now, we are “Ok” with US 10 yr Treasury rates near the mid-range of where rates have traded over the last 2-3 years – however, if we were to pull-up a chart and merely look at the trend… it does start to lean towards an upward bias. For now, there’s nothing to do but observe and report, but we continue to look for potential problems that might throw sand in the gears of the market.
We believe our early aggressive curtailment of Private Credit in our client portfolios was the right move between Q4 of 2025 and Q1 of 2026. Q2 continued with the second quarter of prorated distributions for investors out of most major credit funds in the market. Judging by the activity that we witnessed from Real Estate investors in Q4 of 2022 through Q1 of 2024, there’s a good chance these elevated redemptions in Private Credit may continue for the next year. The overall stability of the pricing of loans in Private Credit also leads me to believe this time period is marked more by fears around liquidity and AI than actual reality of what’s happening on the ground. We are not seeing mass defaults or deteriorating credit ratings for that matter. Q2 had a bit of rebound from Q1 and for now this area of the market is off page 1 of the financial news. We continue to believe returns will most likely be positive for the year as they were in 2022, that was
the last time the market had fears around this asset class, just at a lower level than investors had become accustomed to.
As we stated earlier, the level of global liquidity and appetite for risk continue to astonish us. Earnings have been stronger than expected and may continue to be as we head through 2026. We believe this is largely responsible for the willingness of investors to keep ploughing capital into equity markets despite the geopolitical concerns overseas. Could we see some sort of profit-taking come in and create a downdraft during the September/October time frame which is typical in producing market weakness? Sure – but if interest rates behave, employment stays strong and earnings keep producing – then don’t fight the trend even if these elevated levels make you uncomfortable (Which they should and will).
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This material should not be considered a recommendation to buy or sell securities or a guarantee of future results. Koa Wealth Management, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. More information about Koa Wealth Management, LLC can be found in our Form ADV Part 2, which is available upon request or by visiting our website at www.koawealth.com/disclosure. Past performance is not a guarantee of future results. All investment strategies have the potential for profit or loss; changes in investment strategies, contributions, or withdrawals may materially alter the performance and results of a portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio.
