The Power of Rebalancing
June 1, 2026
By Brett Freese
The second quarter of 2026 provided financial market resilience, geopolitical headwinds, and World Cup excitement.
Like soccer, each day in the financial markets brings us some wins, some losses, some draws (break-even), and both real and fake injuries (I have learned to assume that injuries are fake unless proven real). Market concerns centered on geopolitical tensions and inflation. Market optimism focused on continued economic growth and stronger-than-expected corporate earnings.
Economic & Investment Highlights:
- IRAN Conflict: Over the last three months, we have seen escalation, de-escalation, toll in the Strait of Hormuz, a peace deal, and now a deal at risk. The conflict involving the U.S., Israel, and Iran has so many variables, not the least of which is the lack of trust and confidence that Iran will keep its promises.
- Oil and Energy Shock Consequences: These geopolitical challenges have sent the global energy markets into shock. Brent crude went above $100 per barrel due to supply concerns and daily unknowns. Crude has fluctuated but is now at a more helpful level of around $70 per barrel.
- Increased Inflationary Expectations: Inflation has absolutely been impacted by the recent energy cost spike, and the questions continue to be “how long this conflict will last in its current form” and “how long it will affect energy prices even after the conflict is resolved.” If history proves correct, Central Banks (each country’s interest rate policy-setting organization) should look through energy price shocks and not react emotionally to the high prices.
- The New Federal Reserve Chairman: The New Fed Chairman, Kevin Warsh, is now tasked with understanding and responding to ongoing economic data and expectations. He and the other members of the Federal Open Market Committee (FOMC) have been placed in a position of uncertainty, and due to strong economic indicators like lower jobless claims and continued manufacturing expansion, the expectations of the Fed to reduce interest rates in the 2nd half of the year have decreased. The committee maintained its benchmark interest rate in the 3.50% to 3.75% range. As a reminder, the Federal Reserve has a dual mandate to achieve both stable prices and maximum sustainable employment.
- Artificial Intelligence (AI) and Technology Stock Consolidation: In the 2nd quarter, we have seen the AI investment crowd focus on investing in the physical infrastructure of Artificial Intelligence (energy grids, memory chips, and data centers) and less on the more speculative AI ideas and software. Specifically, in June, the markets experienced a bit of AI exhaustion and a rethinking of the elevated earnings multiples used in the past high prices of the “Magnificent Seven” and other technology stocks.
- Initial Public Offerings in 2026: On June 12, SpaceX debuted at a massive valuation of just under $2 trillion. Additionally, Anthropic (Claude Chatbot), OpenAI (ChatGPT), Deep Fission (advanced nuclear energy), SK Hynix (South Korean Memory Chip Company), and Abra (crypto-based wealth management platform) are some other very big companies that have filed for summer debuts. These are exciting, but making money on IPOs in the short-term has historically been very difficult to do. These stocks will likely be added to your current investment funds over time as they meet the fund’s investment requirements and expectations. All these IPOs will also require a massive amount of capitalization that will need to be funded and absorbed by the financial markets, so expect varying degrees of volatility as they are absorbed into the markets.
- Fixed Income Market: The Fixed Income Market moved towards slightly higher yields in short-term maturities. As noted earlier, the Federal Reserve is likely to keep rates where they are and not reduce them this year due to strong economic indicators and a lack of inflation declines. See “Bonds” rates below.
Historical Stock Market Declines:
Market declines and inclines rarely look the same or even feel the same, but they do happen, and the ups and downs are a part of the process. It is important to have a plan/strategy so emotions don’t dictate buying or selling.
A 5% or greater loss occurs about 3 times a year
A 10% or greater loss occurs about once a year
A 15% or greater loss occurs about once every 2 years
A 20% or greater loss occurs about once every 3.5 years
Please know that when stock prices go down, the “market collapse gurus” receive the most airtime. Likewise, when stock prices go up, all the “bull market gurus” talk about how the market will continue to be up BIG. Please know that most “gurus” are great with hindsight to justify how important it is to have their voice heard.
Market Scorecard for the last 13 weeks ending 6/30/2026:
US Equities:
+ 15.20% S&P 500 (Index of the largest US publicly traded companies)
+ 18.71% Large Cap Growth – Morningstar Category
+ 9.56% Large Cap Value – Morningstar Category
+ 25.71% Russell 2000 Growth (Index of Small-cap growth US publicly traded companies)
+ 17.19% Russell 2000 Value (Index of Small-cap value US publicly traded companies)
International Equities:
+ 14.57% Foreign Large Growth – Morningstar Category
+ 7.07% Foreign Large Value – Morningstar Category
+ 10.87% Foreign Small/Mid Growth – Morningstar Category
+ 4.58% Foreign Small/Mid Value – Morningstar Category
Bonds:
+ 0.32% U.S. Aggregate Bond (Index representing intermediate-term investment-grade bonds in the U.S.)
+ 1.46% Corporate Bond – Morningstar Category
+ 0.44% Short Government – Morningstar Category
+ 2.10% Muni National Bond Intermediate Index – Morningstar Category
Other:
– 13.54% Gold Price
– 13.40% Bitcoin
– 6.17% Commodity Broad Basket – Morningstar Category
Current Annual Money Market Rates ending 06/29/2026:
3.48% Schwab Value Money Market
3.38% Schwab Treasury Money Market
Market Indicators:
Inflation:
4.2% as of May 2026 (up 1.80% from 2.4% in March 2026)
Unemployment:
4.3% as of May 2026 (down 0.1% from 4.4% in February 2026)
Fed Funds Target Rate:
3.50% – 3.75% as of June 2026 (no change from 03/27/26)
Suggested Next Steps:
- Understand that market cycles are normal. The markets go up and down in mostly unpredictable directions and amounts. Many times, the ups and downs of investments seem to make sense only after they happen; however, market prediction is very difficult. (i.e., the next stock market crash has been predicted every year since 2008).
- Your investments are just one factor in the success of your life, money, and purpose. Make sure that you are confident in your full financial plan, so you can successfully have an amazing ROL (Return on Life).
- Your investment allocation and diversification are important factors in both risk management and future returns. Therefore, if you have questions about your investment plan, please schedule a phone or in-person meeting with your TrustWell Financial Advisor(s).
