June Swoon Sets Up July Rally?

The recent market volatility continued into this week as we saw considerable selling pressure on Monday and Tuesday. Most of the decline can be attributed to a rotation out of AI and semiconductor stocks that have carried much of the market's momentum since the lows set at the end of March. One of the leaders in the tech space this year, Micron, reported earnings after the bell on Wednesday. Expectations were high for the widely anticipated release, and Micron managed to deliver in a big way, reporting a strong beat on both revenue and earnings per share. The chip giant continues to defy gravity and churn out blockbuster numbers each quarter. Despite the impressive report, the stock is still down about 1% for the week due to the heavy selling earlier in the week. The Fed's preferred measure of inflation, PCE, was published Thursday morning. Core PCE climbed to 3.4%, in line with expectations, but highlighted the fact that inflation remains sticky and significantly above the Fed's long-term 2% target. With peace talks with Iran seemingly progressing in the right direction, we are hopeful that inflation numbers will begin to tick down over the coming months. The Fed would welcome this development, as cooling inflation would open the door for new Fed Chair Warsh to take a less hawkish stance on interest rates as we close out the year. Markets opened lower today, continuing the downward momentum from early in the week. The encouraging news is that, as of the time of writing, the indices are well off their daily lows and appear poised to close the week on a stronger note. The S&P 500 (pictured above) briefly broke below its 50-day moving average yesterday but has since managed to reclaim that key level, now sitting squarely in line with the widely followed metric. A sustained break below this level and the coinciding support at 7,400 would suggest a deeper correction could be in the cards as we turn the page on this quarter and head into Q3. The recent weakness is neither unexpected nor unhealthy, but we are keeping a close eye on the market's next moves. Many of the Magnificent 7 are testing important technical levels as we approach month and quarter end, with pensions, 401(k)s, and money managers rebalancing their portfolios. We anticipate a bit more volatility in the near term but remain optimistic in our outlook, assuming the market holds current levels. There is historical precedent for the back half of June to produce weaker returns, while seasonality suggests July is typically one of the stronger performing months of the year. We will be watching closely to see if that pattern holds in 2026, but as always, we remain focused on what the charts are telling us and will reposition our holdings should the need arise. We will not be publishing a market note next Friday, as markets are closed in observance of Independence Day. We wish you a wonderful weekend and a very happy Fourth of July as we celebrate 250 years of this great country, we hope you enjoy the fireworks, the family, and a moment of gratitude for the freedoms and opportunities that make this country unlike any other.