Mid-Year 2026
High market volatility continued in the second quarter as economic and geopolitical uncertainty combined to cause anxiety for investors. After a large sell-off in March, stocks rallied during the second quarter, with the Technology sector once again leading the way. Fixed income markets, wary of higher interest rates and rising inflation, had modest gains for the quarter. With 2026 halfway over, there are many issues affecting the economy and the markets that investors will need to navigate.
In May of this year, Kevin Warsh became the chairman of the Board of Governors of the Federal Reserve System. He assumes this position at a critical time for the global economy. With inflation rising to multi-year highs, all eyes are on the Fed to find out what it will do to address the problem. The Federal Reserve has a dual mandate: 1. Maximize employment; 2. Price stability. After his first FOMC meeting as chairman, Warsh said, “This committee will deliver price stability.” A full one third of Fed officials expect multiple interest rate increases this year. This is a major change from the beginning of the year, when most were expecting multiple rate cuts this year. Inflation has been above the Fed’s target of 2% for more than five years. They have indicated that the target will not change. Grab your popcorn, because it looks like the battle in Washington over interest rates is about to heat up.
New job creation has shown some improvement after under performing for over a year. Oil prices, a very important part of our economy, have dropped, which should help with the inflation battle, although oil is far from the only cause of rising inflation. After disappointing GDP growth numbers last year and the first quarter of this year, there will be a lot of attention to second quarter numbers. Increases in productivity due to artificial intelligence are helping offset an increase in workers leaving the workforce. The U.S. economy, driven my multiple forces, is undergoing substantial changes.
Alan Greenspan passed away in June at the age of 100. As chairman of the Federal Reserve for more than 18 years, Greenspan served under four presidents and chaired the Fed during very robust economic growth and dropping inflation. While he wasn’t totally responsible for the economic expansion of the 1980’s and 1990’s, he gets a lot of credit for the improvements after the difficult decade of the 1970’s. The Fed’s 2% inflation target? That was Greenspan’s doing. Most people couldn’t name the current chairman of the Fed, but almost everyone knew who Alan Greenspan was.
There will be a lot to pay attention to in the third quarter. Inflation and GDP will be watched closely by Wall Street in the second half of the year. If you have any questions about the economy or the markets, please do not hesitate to contact us.
Wabash Capital
