Economic Update 6-29-2026

Economic data included a revision upward for Q1 U.S. GDP growth, continued gains in personal income and spending, strength in manufacturing and services PMI data, and a reversal upward in consumer sentiment. However, durable goods orders and new home sales fell back.

Equities fell back globally, primarily in the recently-ebullient technology sector. Bonds fared better as yields fell across the yield curve, with hopes for slowing inflation. Commodities pulled back as the U.S.-Iran truce has held, with easier supply conditions for oil and metals.

U.S. stocks were mixed last week, with the value and small cap groups seeing gains, but growth (including the Nasdaq) falling back. By sector, the defensive groups of health care, utilities, and consumer staples led. Technology lagged with a drop of over -5%, as investors again debated the pros and cons of AI infrastructure spending versus revenue, including announced price hikes for several Apple and Microsoft products due to higher chip costs, and speculation concerns overseas. Real estate also increased by 4% with an easing in interest rates during the week.

Stock index-related headline news is rare, but last week included the annual FTSE Russell index reconstitution at the market close on Friday. This affects over $12 trillion of asset benchmarked to the indexes, including the common Russell 1000, Russell 2000, and several sub-indexes tied to the series. Generally, it’s expected that the R1000 Growth index will see an increase in semiconductor exposure (as their higher growth rates have outweighed their lower multiples in keeping with their traditional cyclicality), and R1000 Value may see a rise in software firms and other cyclicals (with lower multiples relative to firms in the growth index). These relative weights tend to change every year, though the R1000 Growth remains about two-thirds technology plus communications, and half of the R1000 Value is still focused on energy/financials/industrials/materials/utilities (although over a quarter is in the tech+communications segment as well).

Foreign stocks also saw declines, not helped by the negative impact of a stronger U.S. dollar, with developed markets faring slightly better than emerging markets. U.K. spirits were boosted with the resignation of pressured prime minister Starmer, and an impending replacement. For EM, it came down to the increasingly concentrated technology and AI-related stocks in South Korea (where Samsung and SK Hynix dominate at over half of the country’s market cap). Last week, SK Hynix didn’t have any formal company announcements, but did mention that it was shifting focus towards the “general-purpose DRAM market,” a potentially less profitable area, so some investors appeared concerned that the recent AI-fueled boom times might not persist forever. Regulators also considered potential limits on popular leveraged products, after strong retail exuberance and higher margin debt. After a strong stretch of exceptional performance, the margin of error for such news has become a bit thinner.

Bonds were mixed last week, with U.S. Treasuries and investment-grade corporates seeing gains, along with falling yields across the curve, although high yield and floating rate bank loans fell back a bit. International bonds were similarly mixed, with the headwind of a stronger dollar holding back local/unhedged debt in both developed and emerging markets.

Commodities fell back broadly last week, along with price declines in energy, industrial metals, and precious metals. A key component was crude oil prices declining another -9% last week to $70/barrel, as the preliminary U.S.-Iran agreement has led to ships exiting the Strait of Hormuz, further reducing intermediate-term supply concerns. Earlier in the week, Iraq warned that it might quit OPEC if it didn’t get a quota hike (like UAE), in another sign of individual nations wanting to control their own petroleum revenue streams in an uncertain price environment. 

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Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.