This market update highlights key developments across equities, fixed income, and the broader economic landscape as 2026 continues to unfold.
Equities
A Modest Pullback Followed Two Strong Months, with Smaller Companies Leading
After a powerful two-month advance, U.S. stocks took a breather in June. The S&P 500 declined 0.95%, a mild pullback that still left the index up meaningfully for the year and marked one of the strongest quarters for stocks in years when combined with April and May. Volatility returned in a way we had not seen in some time: the technology and semiconductor stocks that led the market higher through the spring became the source of two distinct bouts of selling during the month, tied to concerns about the pace of artificial intelligence spending and a softer outlook for global smartphone demand. Smaller U.S. companies told a different story entirely. The Russell 2000 gained 3.74% for the month, as investors rotated some of their attention away from the most crowded technology names and toward companies more tied to the broader domestic economy. International markets were mixed: developed international stocks (MSCI EAFE) were roughly flat, up 0.09%, while emerging markets, which carry heavy exposure to the same Asian technology and memory companies that drove much of the recent rally, declined 1.37%. The MSCI ACWI, which tracks stocks across the globe, was down 0.77% for the month. We view this pullback as a healthy pause rather than a change in trend, and the second half of the month gave us a clear and encouraging example of why, which we detail below.
Spotlight: A Real Test for the Memory and Chip Story, and a Real Answer
Micron’s Record Quarter Confirmed the Demand Story Behind the Rally
Last month we explained why memory chip makers and traditional processor companies had become such an important driver of market returns: soaring demand for the specialized memory that powers artificial intelligence systems, running up against supply that simply cannot keep pace. June gave that story its first real stress test, and it passed convincingly. Early in the month, shares of Micron, AMD, Intel, and their Asian counterparts SK Hynix and Samsung all fell sharply, in two separate episodes, as investors grew nervous that a disappointing outlook from a competitor and a slowdown in global smartphone sales might signal the beginning of the end for the memory boom. Micron alone fell more than 13% over a pair of trading sessions. Then, on June 24, Micron reported its fiscal third-quarter results, and the numbers were extraordinary: revenue of $41.46 billion, nearly quadruple what the company earned in the same quarter a year earlier, and well above what Wall Street had expected. The company also guided to even stronger results in the coming quarter and disclosed that it now has long-term supply agreements locked in with customers worth roughly $100 billion. The stock jumped 15% the next day, and the rally spread across the rest of the memory and chip complex. The lesson for investors is an important one: this month’s brief scare, followed by results that confirmed demand remains extraordinarily strong and supply extraordinarily tight, is exactly the kind of evidence that separates a durable business trend from mere speculation. We continue to believe this theme reflects real, structural demand, though we would also note that a business this dependent on continued heavy spending by a small number of large technology companies bears watching closely.
Bonds
Yields Climbed as the Fed Signaled a More Cautious, Inflation-Focused Stance
Bond yields moved higher over the course of June, reflecting the market’s shifting expectations for Federal Reserve policy. The 10-year U.S. Treasury yield ended the month at 4.47%, up from where it started, while the 2-year yield, which is especially sensitive to the near-term path of Fed policy, climbed to 4.17%. The move reflects a genuine change in how investors expect the Fed to behave over the balance of the year: as recently as the spring, markets were debating how many rate cuts might arrive in 2026, and by the end of June the conversation had shifted toward whether the Fed’s next move might actually be a hike. Despite this shift, the Bloomberg U.S. Aggregate Bond Index still managed a positive return of 0.24% for the month, helped by the income bonds now generate, which continues to provide a meaningful cushion even when prices move against investors modestly. The yield curve remained positively sloped, with the 10-year yield sitting about 30 basis points above the 2-year, a healthy shape by historical standards. For income-focused investors, this remains a genuinely attractive entry point: yields across the Treasury and investment-grade markets are near their highest levels in years, and bonds continue to serve their purpose of generating reliable income while helping to steady a portfolio through periods of equity volatility like the one we saw in June.
The Federal Reserve
A New Chair’s First Meeting Sends a Clear, Hawkish Signal
June 16 and 17 marked the first Federal Reserve policy meeting under new Chair Kevin Warsh, and it set an unmistakable tone for his tenure. The committee voted unanimously to hold rates steady at 3.50% to 3.75%, a decision markets had widely expected. What surprised investors was everything around the decision. The Fed’s policy statement was dramatically shortened, at roughly a third the length of the prior release, and notably dropped language that had previously signaled openness to future rate cuts. Chair Warsh also declined to submit his own projection to the Fed’s closely watched “dot plot,” explaining that he does not find the exercise helpful, though he encouraged his colleagues to continue submitting theirs. Those colleagues sent a clear message: where the committee had projected one rate cut for 2026 as recently as March, the June projections showed most members now expect rates to hold steady or rise before year-end. In his press conference, Warsh emphasized that persistently high prices remain a real burden on American households and stressed the Fed’s determination to restore its inflation-fighting credibility. He also announced the formation of several task forces to review how the Fed communicates and operates, an early sign of the institutional changes he intends to pursue. Markets read the overall message as hawkish, and stocks and bonds both moved to reflect a Fed that may need to do more, not less, to bring inflation back to its target.
The Economy and Global Events
Inflation Ran Hot, the Labor Market Stayed Resilient, and Oil Remained Volatile
The economic data released in June confirmed that inflation pressures, while expected to fade over time as energy markets normalize, have not yet done so. May’s consumer price index rose 4.2% from a year earlier, and the Fed’s preferred inflation gauge, released later in the month, showed prices up 4.1% year-over-year, both still elevated by energy costs tied to the conflict in the Middle East. On a more encouraging note, core inflation, which strips out food and energy, continued to run cooler than the headline figure, suggesting the pressure remains concentrated in energy rather than broadening across the economy. The labor market remained a genuine bright spot: employers added 172,000 jobs in May, well above expectations, and the unemployment rate held steady at 4.3%. Consumer confidence, as measured by the Conference Board, ticked up slightly to 91.2 in June from a downwardly revised 90.6 in May, with falling oil prices during the back half of the month providing some relief to households worried about inflation. Energy markets themselves told a genuinely eventful story. Oil prices fell substantially for much of June as a ceasefire framework between the United States and Iran took hold and the Strait of Hormuz began to see a partial, provisional reopening of shipping, with prices approaching levels last seen before the conflict began in February. However, fresh clashes between U.S. and Iranian forces in the final days of the month, including strikes on Iranian military targets after an attack on a commercial tanker, pushed oil prices back up. While the environment in the middle east is volatile, ending the conflict serves the interest of both countries and we expect continued movement towards peace.
Bottom Line
A Pause That Reinforces Discipline, Not a Reason to Abandon It
June was a reminder that markets do not move in a straight line, even during a genuine and well-supported bull market. The modest pullback in the S&P 500 followed two exceptionally strong months, and came alongside real, constructive developments: Micron’s earnings report gave concrete, verifiable evidence that the demand driving this year’s technology rally is genuine rather than speculative, and the rotation into smaller companies suggests the market’s gains are broadening rather than narrowing. On policy, the Federal Reserve’s new leadership has adopted a more cautious, inflation-focused tone, and we do not expect additional rate cuts in the near term. That said, we do not see this as a hiking cycle either; the more likely path is a Fed that holds steady while it waits for inflation data tied to energy costs to continue normalizing. Similarly, while the situation in the Middle East bears watching, the broader trend has been toward de-escalation, and we would expect it to work its way toward resolution over time rather than derail the outlook. A portfolio built around quality companies, sensible diversification across sectors and geographies, and bonds that now generate real income remains exactly the right foundation for navigating the second half of the year. We will continue to watch the data closely and will keep you informed as the picture develops. As always, we welcome the opportunity to discuss how these developments relate to your specific financial plan.
Disclosure
This material is provided by Gryphon Financial Partners, LLC (“Gryphon”) for informational purposes only. It is not intended as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Facts presented have been obtained from sources believed to be reliable, though Gryphon cannot guarantee their accuracy or completeness. Gryphon does not provide tax, accounting, or legal advice. Individuals should seek such guidance from qualified professionals based on their specific circumstances.