NEPC's June 2026 Market Commentary

Global equities were mixed in June as sentiment around growth-oriented areas of the market softened following outsized returns posted during most of the second quarter. As such, the S&P 500 fell 1.0% during the month, while still posting a 15.2% gain for the quarter on the back of strong earnings momentum related to the ongoing AI buildout. The shift in sentiment fueled a rotation within markets, with cyclical and value-oriented areas of the market outperforming: the Russell 1000 Value Index gained 2.3%, while the Russell 1000 Growth index lost 2.7% in June – pushing the year-to-date outperformance for Value over 11% as of June 30^th. In addition, U.S. small-caps benefitted from these dynamics with the Russell 2000 Index adding 3.7% in June, despite a hawkish repricing of Fed Funds futures.

Outside the U.S., the MSCI Emerging Markets index came under pressure, falling 1.4% given the AI exposure present in Korea and Taiwan, along with a firmer U.S. Dollar that weighed on returns in local currencies.

Within rates, the Fed Open Market Committee left its policy rate unchanged at a range of 3.50%-3.75% and offered more hawkish messaging than anticipated from Kevin Warsh’s first meeting as Fed Chair citing the above-Fed target inflation backdrop. In response, market rate expectations continue to forecast tighter policy, reflecting expectations for 1-2 rate hikes through the end of 2026.

In real assets, spot WTI crude oil fell 23.7% during the month as markets reacted to news of a ceasefire agreement between the U.S. and Iran. That said, the situation in the Middle East remains fragile and we anticipate continued volatility in energy prices as traffic within the Strait of Hormuz remains below pre-conflict levels. Within the precious metals space, spot gold prices also declined sharply, falling 11.7% in June, as central bank demand softened relative to levels seen earlier in 2026.

We encourage investors to fully utilize the portfolio risk budget and recommend maintaining a U.S. equity overweight within public equity allocations given the supportive macro backdrop and exposure to broad-based earnings strength unique to the U.S. market. We still recommend investors hold high-quality, liquid assets and suggest holding safe-haven fixed-income securities at strategic target levels to support portfolio liquidity. We also advise shying away from liquid segments of lower-quality credit given tight spread levels and market sentiment.