A recap of the second quarter's market recovery, what the Mag 7's fading dominance means for diversified portfolios, the IPO market's return, and how to think about timing the market.
By John Owens, CFP®, EA, ECA, CPWA®, Managing Partner, Brooklyn Fi
The second quarter proved to be a strong recovery from the sell-off that occurred in March at the start of the war with Iran. S&P 500 stocks returned 15% on the quarter, turning positive for the year. Real estate gained 11% on the quarter to extend its 2026 gains to nearly 15%. Non-US Developed Market stocks gained 11% and are up almost 10% on the year, while Emerging Market stocks extended their remarkable run to over 24% year-to-date.
On the bond side of the portfolio, the Aggregate US bond market gained about half a percent and remains slightly positive on the year. Municipal bonds gained over 2.5% to move into positive territory. International bonds are slightly down on the year after posting gains of about 1% this quarter. Commodities were a mixed story: oil dropped over 30% on the quarter but is still up 26% year-to-date, while gold surrendered double digits and is now negative on the year.
Smaller company stocks did exceedingly well this quarter, with Small Cap Value stocks gaining 18% and now sitting up over 23% on the year, marking a strong rotation away from larger, more growth-oriented stocks.
Asset Class
Q2 Returns
YTD Return
Emerging Market Stocks
24.1%
24.0%
Small Cap Value Stocks
18.0%
23.0%
REITs
11.1%
14.9%
Commodities
-10.0%
14.4%
Large US Stocks (S&P 500)
14.5%
10.2%
International Developed Stocks
10.9%
9.8%
Diversified Portfolio
9.0%
9.3%
Municipal Bonds
2.5%
2.3%
Cash
0.9%
1.8%
Corporate Bonds
0.6%
0.6%
International Bonds
0.9%
-0.7%
Chart of the Quarter
Mag 7 Not As Dominant
Looking at our globally diversified portfolios, we've been very happy to see pockets of the portfolio we deliberately allocate to - Non-US stocks and smaller, more value-oriented stocks - outperform as of late. Maintaining this global exposure ultimately helps reduce risk and enhance returns over the long-run.
So far this year, the Mag 7 is only responsible for 1% of the returns seen by the S&P 500, after being responsible for roughly half of the index's returns for each of the past four 4 years. A friendly reminder that diversification is the best way to reduce risk over the long run, and over-reliance on one stock (or set of stocks) can mean your portfolio looks much different than the broader market.
Passive Investing
Index Funds And IPOs
One question that has come up a lot over the last couple of months is how index funds will handle SpaceX after its IPO. While there were some rule changes that applied during the IPO process, it's important to remind ourselves that as passive investors, we are owning all the stocks in the market, not just the ones we like.
It's also worth noting that there's some nuance in how SpaceX and other newly public companies get included in indexes. Index weight is based on the float of shares actually available for trading, not total market cap, so SpaceX on day one, or even day 30, is not going to make up the same percentage of an underlying index as a comparable $2 trillion company that's been publicly traded for years.
Ultimately, nobody knows what SpaceX will be worth over the long run. Maybe it's worth $10 trillion, maybe it's worth nothing. What we do know is that owning a broad basket of stocks, maintaining low-cost exposure to those stocks, and optimizing for taxes is, over the long run, typically one of the most efficient ways to build wealth, and that the composition of indices is always changing. The beauty of an index is that you can keep the same investment while participating in those underlying changes over time.
IPO Market
IPOs Are Back
With the SpaceX IPO last month, IPO proceeds have hit their highest level since 2021, eclipsing $100 billion. To put that in context, the high-water mark from 2021 was $142 billion raised across nearly 400 IPOs. This year, $111 billion has been raised across just 76 IPOs, so we're seeing a much more concentrated pool of capital, with SpaceX being the largest single recipient of that boom.
As of late June, there have been 122 new IPO filings this year, which is a 7% increase compared to this time last year.
On Our Radar
Future Potential IPOs
Company
Business Description
Est. Sales ($mm)
Est. Valuation ($mm)
Anthropic*
Developer of a foundational LLM known for its AI assistant Claude.
$43,600
$965,000
OpenAI Group*
Developer of AI models and applications, including ChatGPT.
$25,000
$852,000
Roze*
SoftBank carve-out developing robotics and AI infrastructure.
—
$100,000
DayOne Data Centers*
Singapore-based global data center developer spun out of GDS Holding.
—
$20,000
Inspire Brands*
Franchises Arby's, Buffalo Wild Wings, and Dunkin' Donuts restaurants.
$32,600
$20,000
Proofpoint
Provides security software offering threat detection and data protection.
$2,000
$20,000
Authentic Brands Group
Owns and licenses various consumer lifestyle brands.
$1,500
$18,000
Aggreko*
UK-based provider of energy, HVAC, and compressor equipment.
—
$15,000
Discord*
Provides a gaming-focused voice chat service and social network.
$550
$15,000
Tenneco*
Maker of vehicle emission systems, powertrains, and other auto parts.
$18,000
$14,000
Kraken*
Operates a cryptocurrency exchange.
$1,575
$13,333
Jersey Mike's*
Leading sandwich restaurant chain with over 4,000 locations.
$3,300
$12,000
Axyv (Missile Solutions)*
Missile systems carve-out of defense company L3Harris Technologies.
$3,700
$11,000
Oura Health*
Produces wearable rings that provide health metrics and insights.
$1,300
$10,900
Viva Republica (Toss)
South Korean operator of a financial services app.
—
$10,800
Holtec International*
Provider of nuclear equipment and is developing a small modular reactor.
$500
$10,000
FalconX*
Provides cryptocurrency-focused digital brokerage services.
—
$8,000
First Student*
Leading provider of student transportation services.
$2,475
$4,600
Barrick North America*
North American gold assets of Barrick Mining.
—
—
SB Energy*
Develops and operates power infrastructure, with a focus on data centers.
—
—
Source: Renaissance Capital. *Reportedly filed confidentially or selected banks.
Investor Behavior
Timing the Market Should I Be Investing Right Now?
I get a few emails whenever markets hit all-time highs asking whether someone should time the markets or whether now is a good time to invest. My immediate response is always to understand a little more about why someone is asking the question. What's the impetus? Are they hearing things from colleagues, the media, or something they read? Are they seeing something specific in their own portfolio? Is their industry being affected?
Often, there's either a broader societal sentiment or something they've been reading that's driving the feeling. From there, I take a step back, because whether you should be invested in this market and how much you should be invested is really contingent on your timeline. What we know is that it is very easy to lose money in the market over the course of a single year. So if you're buying a home soon, worried about a layoff, planning a big family vacation, or expecting a tax bill from a liquidity event, those funds should be invested very conservatively, or perhaps sit in cash or a money market fund entirely.
However, if we're looking at a down payment in a few years, then maybe we can put a small portion of those proceeds to work with some stock market exposure, accepting both the risk and reward potential of putting that in the market.
If the money is for your newborn's college education, we have a definitive timeline, one that's roughly 18 years away, and that runway allows us to take more risk meaningfully in a 529 account. And if the money is for retirement, whether that's a few decades away or already 10-20 years into it, we need to make sure it's invested properly to beat inflation, keep up with your growing cost of living, and keep your plan on track. Ultimately, when we think about timing the market, we really need to be thinking about the timing of our own expenses and liquidity needs. That should be the driving factor in how we allocate investments, alongside what level of risk you're genuinely willing to sit with.
JO
About the Author — John Owens, CFP®, EA, ECA, CPWA®
John Owens, CFP®, EA, ECA, CPWA® is the Managing Partner of Brooklyn Fi. He leads the firm's investment strategy while overseeing day-to-day operations. With deep technical expertise in tax, equity compensation, and portfolio management, John ensures the firm delivers thoughtful, comprehensive advice to a growing client base. In his role, John chairs the investment committee at BKFi that oversees nearly $650M in client assets.
This document contains forward-looking statements, predictions and forecasts ("forward-looking statements") concerning our beliefs and opinions in respect of the future. Forward-looking statements necessarily involve risks and uncertainties, and undue reliance should not be placed on them. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Past performance is not indicative of future results. All investments involve risk, including the loss of principal.
Have Questions About Your Portfolio?
Let's talk about your plan
Whether you're wondering how much to invest right now, how the IPO market affects your index funds, or how your timeline should shape your allocation, our team is here to help.
Q2 2026 Investment Commentary
A recap of the second quarter's market recovery, what the Mag 7's fading dominance means for diversified portfolios, the IPO market's return, and how to think about timing the market.
Overview
The second quarter proved to be a strong recovery from the sell-off that occurred in March at the start of the war with Iran. S&P 500 stocks returned 15% on the quarter, turning positive for the year. Real estate gained 11% on the quarter to extend its 2026 gains to nearly 15%. Non-US Developed Market stocks gained 11% and are up almost 10% on the year, while Emerging Market stocks extended their remarkable run to over 24% year-to-date.
On the bond side of the portfolio, the Aggregate US bond market gained about half a percent and remains slightly positive on the year. Municipal bonds gained over 2.5% to move into positive territory. International bonds are slightly down on the year after posting gains of about 1% this quarter. Commodities were a mixed story: oil dropped over 30% on the quarter but is still up 26% year-to-date, while gold surrendered double digits and is now negative on the year.
Smaller company stocks did exceedingly well this quarter, with Small Cap Value stocks gaining 18% and now sitting up over 23% on the year, marking a strong rotation away from larger, more growth-oriented stocks.
Mag 7 Not As Dominant
Looking at our globally diversified portfolios, we've been very happy to see pockets of the portfolio we deliberately allocate to - Non-US stocks and smaller, more value-oriented stocks - outperform as of late. Maintaining this global exposure ultimately helps reduce risk and enhance returns over the long-run.
So far this year, the Mag 7 is only responsible for 1% of the returns seen by the S&P 500, after being responsible for roughly half of the index's returns for each of the past four 4 years. A friendly reminder that diversification is the best way to reduce risk over the long run, and over-reliance on one stock (or set of stocks) can mean your portfolio looks much different than the broader market.
Index Funds And IPOs
One question that has come up a lot over the last couple of months is how index funds will handle SpaceX after its IPO. While there were some rule changes that applied during the IPO process, it's important to remind ourselves that as passive investors, we are owning all the stocks in the market, not just the ones we like.
It's also worth noting that there's some nuance in how SpaceX and other newly public companies get included in indexes. Index weight is based on the float of shares actually available for trading, not total market cap, so SpaceX on day one, or even day 30, is not going to make up the same percentage of an underlying index as a comparable $2 trillion company that's been publicly traded for years.
Ultimately, nobody knows what SpaceX will be worth over the long run. Maybe it's worth $10 trillion, maybe it's worth nothing. What we do know is that owning a broad basket of stocks, maintaining low-cost exposure to those stocks, and optimizing for taxes is, over the long run, typically one of the most efficient ways to build wealth, and that the composition of indices is always changing. The beauty of an index is that you can keep the same investment while participating in those underlying changes over time.
IPO MarketIPOs Are Back
With the SpaceX IPO last month, IPO proceeds have hit their highest level since 2021, eclipsing $100 billion. To put that in context, the high-water mark from 2021 was $142 billion raised across nearly 400 IPOs. This year, $111 billion has been raised across just 76 IPOs, so we're seeing a much more concentrated pool of capital, with SpaceX being the largest single recipient of that boom.
As of late June, there have been 122 new IPO filings this year, which is a 7% increase compared to this time last year.
Future Potential IPOs
Source: Renaissance Capital. *Reportedly filed confidentially or selected banks.
Investor BehaviorTiming the Market Should I Be Investing Right Now?
I get a few emails whenever markets hit all-time highs asking whether someone should time the markets or whether now is a good time to invest. My immediate response is always to understand a little more about why someone is asking the question. What's the impetus? Are they hearing things from colleagues, the media, or something they read? Are they seeing something specific in their own portfolio? Is their industry being affected?
Often, there's either a broader societal sentiment or something they've been reading that's driving the feeling. From there, I take a step back, because whether you should be invested in this market and how much you should be invested is really contingent on your timeline. What we know is that it is very easy to lose money in the market over the course of a single year. So if you're buying a home soon, worried about a layoff, planning a big family vacation, or expecting a tax bill from a liquidity event, those funds should be invested very conservatively, or perhaps sit in cash or a money market fund entirely.
However, if we're looking at a down payment in a few years, then maybe we can put a small portion of those proceeds to work with some stock market exposure, accepting both the risk and reward potential of putting that in the market.
If the money is for your newborn's college education, we have a definitive timeline, one that's roughly 18 years away, and that runway allows us to take more risk meaningfully in a 529 account. And if the money is for retirement, whether that's a few decades away or already 10-20 years into it, we need to make sure it's invested properly to beat inflation, keep up with your growing cost of living, and keep your plan on track. Ultimately, when we think about timing the market, we really need to be thinking about the timing of our own expenses and liquidity needs. That should be the driving factor in how we allocate investments, alongside what level of risk you're genuinely willing to sit with.
About the Author — John Owens, CFP®, EA, ECA, CPWA®
John Owens, CFP®, EA, ECA, CPWA® is the Managing Partner of Brooklyn Fi. He leads the firm's investment strategy while overseeing day-to-day operations. With deep technical expertise in tax, equity compensation, and portfolio management, John ensures the firm delivers thoughtful, comprehensive advice to a growing client base. In his role, John chairs the investment committee at BKFi that oversees nearly $650M in client assets.
This document contains forward-looking statements, predictions and forecasts ("forward-looking statements") concerning our beliefs and opinions in respect of the future. Forward-looking statements necessarily involve risks and uncertainties, and undue reliance should not be placed on them. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Past performance is not indicative of future results. All investments involve risk, including the loss of principal.
Let's talk about your plan
Whether you're wondering how much to invest right now, how the IPO market affects your index funds, or how your timeline should shape your allocation, our team is here to help.
Book a Call →