View from the Observation Deck

We update this post on an ongoing basis to provide investors with insight regarding the earnings climate of the S&P 500 Index (“Index”). While quarterly earnings estimates are a useful indicator of a company’s financial performance, they are not guarantees. Equity analysts continually adjust their projections as new information is obtained. That said, a comparison of analyst estimates with actual company results may offer investors insight into broader equity market health, in our opinion. As of August 31, 2026, 487 of the 503 stocks (96.8%) that comprise the Index had reported Q2’26 earnings, according to data from FactSet.

The percentage of Index companies that beat earnings expectations in Q2’26 is above the 5-year average of 78.0%.

At 86.0%, Q2’26’s earnings beat rate is the highest in today’s dataset, besting last quarter’s earnings beat rate of 84.6%. Nine of the eleven sectors that comprise the Index reported year-over-year (y-o-y) earnings growth rates of at least 10% in Q2’26.

FactSet reported that the Index’s Q2’26 blended, y-o-y earnings growth rate registered a staggering 52.0% as of August 28, 2026.

Should these levels hold, they will mark the highest y-o-y earnings growth rate reported by the Index since Q2’21 (when companies had considerably weaker comparisons due to COVID-era shutdowns). It will also mark the second consecutive quarter of earnings growth above 25% and the seventh consecutive quarter of double-digit earnings growth for the Index. 

Positive earnings surprises are at record levels.

Reported earnings were a record 26.5% above estimates on average. For comparison, the 5-year average earnings surprise is 7.0%.

Calendar year earnings estimates continue to climb.

FactSet data shows that analysts increased their calendar year 2026 Index earnings estimates from 311.19 to 361.34 between December 31, 2025, and August 28, 2026. The current figure represents a y-o-y increase of 31.5% in 2026.

The three sectors with the highest Q2’26 y-o-y earnings growth rates and their percentages were as follows: Energy (146.3%); Communication Services (116.9%); and Consumer Discretionary (92.4%). For comparison, the lowest y-o-y earnings growth rates were experienced by Consumer Staples (13.5%); Real Estate (8.6%); and Health Care (-6.5%).

Takeaway: An above-average number of Index constituents (86.0%) reported earnings above estimates in Q2’26, putting the Index’s y-o-y earnings growth rate at a staggering 52%. Two of the Index’s constituents saw unusually high positive earnings surprises from unusually large investment gains included in their GAAP earnings results. Even if we were to remove those outliers, the Index’s earnings growth rate would still be an impressive 33.8% during the quarter. Calendar year earnings growth rates reflect the quarter’s trend. FactSet reported that the Index’s 2026 bottom-up calendar-year earnings estimates totaled a record 361.34 on August 31, 2026, representing a y-o-y increase of 31.5%. Surging earnings have compressed valuations, with the Index’s forward 12-month price-to-earnings (P/E) ratio sitting at 19.6 on August 28, 2026, below the 5-year average of 19.9. Revenue estimates lend support to analysts’ earnings optimism. The Index’s blended revenue growth rate was 15.5% in Q2’26, marking its second consecutive quarter of double-digit revenue growth, according to FactSet. 

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry.

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View from the Observation Deck

Our last two posts highlighted the year-to-date (YTD) total returns of the best- and worst-performing S&P 500 Index (“Index”) subsectors. While investment return data can be incredibly useful, we suspect most of our readers are keenly aware that “past performance is no guarantee of future results.” With that in mind, we thought a discussion focused on what we believe is one fundamental driver of market performance (over time) was warranted. Today’s chart highlights the YTD change in analysts’ calendar year 2026 and 2027 estimated earnings per share (“EPS”) for the fifteen subsectors that we highlighted in Tuesday’s post: “Worst-Performing S&P 500 Index Subsectors”.

• As indicated above, calendar year 2026 and 2027 EPS estimates for the Advertising subsector declined by 49.5% and 47.0%, respectively, between December 31, 2025 and August 7, 2026. Advertising was the second-worst-performing subsector YTD in 2026 as of our post on August 11, 2026.
  
  
• Construction Materials, which was the fifteenth-worst-performing subsector as of our last post, saw calendar year 2026 and 2027 EPS estimates decline by 6.9% and 5.2%, respectively, over the same period. 
  
  
• At -29.0%, the Footwear subsector saw the worst total return YTD through August 7, 2026, while calendar year 2026 and 2027 EPS estimates declined by 2.9% and 17.5%, respectively. 
  
  
• Broadcasting, Application Software, and Data Processing & Outsourcing are the only subsectors where both 2026 and 2027 EPS estimates increased YTD.

Takeaway: Oil prices remain elevated as the war with Iran grinds through its sixth month, sustaining inflationary pressure and increasing the likelihood of higher interest rates by year-end. The potential for rate hikes has weighed notably on Consumer Discretionary stocks, with the Consumer Discretionary sector accounting for five of the fifteen worst-performing subsectors YTD through August 7, 2026. Capital expenditure (capex) on AI infrastructure is booming, with FactSet estimating that aggregate capex of the top five U.S. hyperscalers will total $691 billion in their respective 2026 fiscal years alone. Disruption from the advancements these investments are funding could pose a threat to many existing industries. Application Software and Data Processing & Outsourcing are two examples of this tension, declining by 18.0% and 24.5%, respectively, YTD through August 7, 2026, despite 2026 calendar year EPS estimates increasing by 6.0% and 2.4% over the same period. As always, these are estimates and are subject to change. We will continue to provide updates as developments warrant.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry. 

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View from the Observation Deck

Today's blog post is for those investors who want to drill down below the sector level to see what is not performing well in the stock market this year. The S&P 500 Index (“Index”) was comprised of 11 sectors and 126 subsectors as of 8/7/26, according to S&P Dow Jones Indices. The 15 worst-performing subsectors in today’s chart posted total returns ranging from -12.7% (Construction Materials) to -29.0% (Footwear) over the period. Click here to view our last post on this topic.

• As indicated in the chart above, the S&P 500 Consumer Discretionary Index accounted for five of the 15 worst-performing subsectors year-to-date (YTD) through 8/7, followed by Communication Services with four subsectors represented. 
  
  
• Each of the 11 sectors that comprise the broader Index delivered positive total returns YTD through 8/7. Communication Services, Consumer Discretionary, and Utilities were the worst performers, generating total returns of 2.7%, 2.9%, and 3.6%, respectively. The broader S&P 500 Index increased by 14.1% over the period.
  
  
• The smallest S&P 500 Index sector by weight was Materials at 1.81% on 8/7/26, according to S&P Dow Jones Indices. Real Estate and Utilities were the next-largest sectors with weightings of 1.82% and 2.04%, respectively.

Takeaway: Five of the worst-performing subsectors in today’s chart belong to the S&P 500 Consumer Discretionary Index, which was also the second-worst-performing sector in the Index YTD, generating a total return of 2.9% through 8/7. As we see it, the sector’s results likely reflect deteriorating sentiment amid the ongoing Iranian war and the subsequent increase in global oil prices. Application Software, which was one of the worst performers in our last post on this topic, remains among them today, indicating just how persistent AI’s tech industry disruption continues to be, in our opinion. As always, there are no guarantees, but there could be some deep value opportunities in this group of subsectors. For those investors who have interest, there are a growing number of packaged products, such as exchange-traded funds, that feature S&P 500 Index subsectors.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry. 

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View from the Observation Deck

Today's blog post is for those investors who want to drill down below the sector level to see what is performing well in the stock market. The S&P 500 Index (“Index”) was composed of 11 sectors and 126 subsectors on July 31, 2026, according to S&P Dow Jones Indices. The 15 top-performing subsectors in today’s chart registered total returns ranging from 89.3% (Semiconductor Equipment) to 34.1% (Data Center REITs). Click here to view our last post on this topic.

• As indicated in the chart above, Industrials and Technology were tied for the highest number of top-performing subsectors at four each. Energy only had one subsector represented, down from five the last time this data was reported.
  
  
• With respect to the 11 major sectors that comprise the Index, Energy generated the highest total return for the period captured in the chart, increasing by 32.5%. The second- and third-best performers were Information Technology and Industrials, with total returns of 22.3% and 20.8%, respectively. For comparison, the Index’s total return was 13.8% over the period.
  
  
• As of July 31, 2026, the most heavily weighted sector in the Index was Information Technology at 36.6%, according to S&P Dow Jones Indices. Financials and Communication Services were the next-largest sectors with weightings of 12.5% and 9.9%, respectively.

Takeaway: In our view, economic factors have been key catalysts driving several of the subsector total returns in today’s chart. Demand for memory chips has surged amid rapid AI adoption, creating a global shortage of chips required for data storage and processing. How long this shortage will last is up for debate. One major global chip manufacturer reported that it expects diminished supply to last until 2028, while a recent report from Deloitte estimated it could persist into 2029. The resulting price increases have been stunning, with costs for AI server dynamic random-access memory (DRAM) now estimated to increase by nearly 400% year-over-year in 2026. Oil has shown a similar trajectory this year, with prices surging amid supply constraints from the Iranian war. A notable addition to today’s chart is the Steel subsector, which has increased by 64.5% year-to-date (YTD). As we see it, the subsector’s performance could be the result of increased domestic demand as companies shift sourcing domestically amid rising tariffs. We plan to update this post as developments warrant.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry.

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View from the Observation Deck

Today's charts are intended to give investors a visual perspective on historical and estimated earnings performance for the S&P 500 Index (“LargeCap Index”), the S&P MidCap 400 Index (“MidCap Index”), and the S&P SmallCap 600 Index (“SmallCap Index”). The charts track each Index’s quarterly earnings per share (EPS) from Q3’24 through Q2’26. They also include Bloomberg’s estimated EPS for Q3’26.

As the charts reveal, Q2’26 EPS have increased for each of the three indices in today’s charts (data through August 3, 2026). 

Year-over-year EPS increased by 27.2% (LargeCap Index) and 16.8% (MidCap Index), and 14.8% (SmallCap Index) so far in Q2’26.

Earnings growth is expected to persist in Q3’26, with earnings growth rate estimates of 20% or higher for each of the three indices.

Analysts currently estimate year-over-year earnings will increase by 32.9%, 20.0%, and 23.7% for the LargeCap, MidCap, and SmallCap Indices, respectively, in Q3’26.

Estimated 2026 calendar year EPS for each Index were as follows (not in the charts): S&P 500 Index (354.46); S&P MidCap 400 Index (219.63); S&P SmallCap 600 Index (107.53). 

Year-over-year earnings growth rates implied by these estimates are as follows: S&P 500 Index (+31.9%); S&P MidCap 400 Index (+23.7%); S&P SmallCap 600 Index (+23.2%). Calendar year 2026 estimates are particularly notable for the LargeCap and SmallCap Indices given tough comparisons from the previous year. Data from Bloomberg shows that LargeCap and SmallCap earnings increased by 12.5% and 8.5%, respectively, in 2025.

Takeaway: Investors have increased their allocations to SMID cap stocks since the start of the year, sending the SmallCap and MidCap Indices surging by 23.7% and 15.8% (total return), respectively, year-to-date through August 3. For comparison, the LargeCap Index returned 11.8% over the same period. We believe that corporate earnings drive the direction of stock prices over time, especially when the major indices are trading at or near record highs. Analyst estimates have increased as the year has unfolded, with LargeCap, MidCap, and SmallCap Index EPS estimated to reach a record 354.46, 219.63, and 107.53, respectively, in 2026 (as of August 3). For comparison, analyst estimates were much lower at the start of the year, with the same indices estimated to see calendar year 2026 earnings of 310.84, 202.91, and 96.06 on 12/31/25. As always, these are estimates and are subject to change (and have changed since our last post). We will continue to report back as developments warrant.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization.

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View from the Observation Deck

Investors directing capital into U.S. mutual funds and exchange-traded funds (ETFs) favored passive investing over active management during the 12-month period ended June 30, 2026.

Active mutual funds and ETFs reported estimated net outflows of $2 billion compared to net inflows of $1,249 billion for passive funds over the trailing 12 months (TTM) ended June 30, 2026.

Net inflows across all categories of passively managed equities (including Allocation and Nontraditional Equity) totaled $783 billion over the period, compared to inflows of $463 billion into passive fixed income funds. On the actively managed side, equity funds saw combined net outflows of $477 billion while fixed income garnered inflows of $416 billion.

Equity mutual funds and ETFs saw significantly lower inflows than their fixed income counterparts over the trailing 12-month period.

Combined, active and passive equities experienced inflows of $306 billion over the trailing 12 months, based on Morningstar data. For comparison, the active and passive Taxable and Municipal Bond categories reported net inflows of $879 billion over the same time frame. The difference in flows between these categories is notable, especially given persistent outperformance in equities compared to their fixed income counterparts. Data from Bloomberg showed that the S&P 500, S&P MidCap 400, and S&P SmallCap 600 Indices produced total returns of 22.3%, 25.9%, and 37.6%, respectively, over the period. For comparison, the Bloomberg Global-Aggregate Bond, Bloomberg U.S. Aggregate, and Bloomberg Municipal Long Bond Indices saw total returns of 0.6%, 3.8%, and 9.7%, respectively.

Foreign and emerging market equities maintained positive performance over the trailing 12 months.

The MSCI Emerging Net Total Return and MSCI Daily Total Return Net World (ex U.S.) Indices posted total returns of 43.5% and 21.0%, respectively, between Q2’25 and Q2’26, according to Bloomberg data.

Takeaway: Passive mutual funds and ETFs saw combined inflows of $1,249 billion compared to net outflows of $2 billion for active funds over the trailing 12 months ended in June 2026. Net inflows into fixed income investments totaled $879 billion compared to net inflows of $306 billion into equity funds over the period. Morningstar notes that investor interest in municipal bonds has been robust, with the category recording record net inflows of nearly $32 billion in the second quarter of 2026. Interest in the taxable bond category has also been strong, with the category adding $72 billion in new assets in June 2026 alone. As noted above, international equity performance remained compelling. That said, net flows into international equity funds have been volatile as investors navigate continued conflict between the U.S. and Iran. Morningstar data showed the international equity category shed nearly $16 billion in May 2026 before adding just $2 billion in June, bringing the second quarter’s total inflow to just $11 billion.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. companies with a small market capitalization. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI World (ex U.S.) Index is a free-float weighted index designed to measure the equity market performance of developed markets. The Bloomberg Municipal Long Bond Index cover the USD-denominated long-term tax exempt bond market, including local general obligation, revenue, insured, and prefunded bonds. The Bloomberg U.S. Aggregate Bond Index measures the investment grade, U.S. dollar-denominated, fixed rate taxable bond market. The Bloomberg Global Aggregate Bond Index measures global investment grade debt in local currency markets. 

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View from the Observation Deck

Tracking the direction of worldwide semiconductor sales can provide investors with additional insight into the potential demand for tech-oriented products and the overall climate for technology stocks, in our opinion. As evidenced by continued developments in artificial intelligence (AI) and robotics, as well as the vast market for smartphones, tablets, and wearables, semiconductors continue to be integrated into everyday life in increasingly creative ways.

Worldwide sales of semiconductors surged by 79.2% year-over-year (y-o-y) to a record $298.5 billion in Q1 2026, up from $166.6 billion in Q1 2025.

Semiconductor sales continue to benefit from rising demand. Global sales totaled a record $99.5 billion in March 2026 alone, up from $55.5 billion in March 2025. Demand increased the most in the Asia Pacific region, where semiconductor sales increased by 108.5% y-o-y in March 2026, followed by the Americas (+83.1%) and China (+74.8%), according to the Semiconductor Industry Association.

Semiconductor sales appear to follow fluctuations in the price of technology stocks.

As observed in today’s chart, changes in semiconductor sales often mirror changes in the performance of the S&P 500 Technology Index (Technology Index). Case in point, the Technology Index realized a total return of 29.1% over the trailing 12 months ended March 2026. As noted above, annual semiconductor sales increased by 79.2% over the same period.

Takeaway: Volatility among technology stocks has been elevated in 2026, with the Technology Index shedding 9.1% (total return) in Q1 2026 before rebounding 31.8% in Q2 2026. Month-to-date through July 24, the sector has shed 4.3%, making it the broader S&P 500 Index’s second-worst performer so far this month. Even so, it appears the general correlation between sales and total return persists, for now. Capital expenditure (capex) on AI buildouts continues to grow. Aggregate capex is estimated to total $691 billion among the top five U.S. hyperscalers (in their respective 2026 fiscal years), up from $379 billion in fiscal year 2025, according to FactSet. Record sales have led to astronomical earnings growth estimates. According to Bloomberg data as of July 24, 2026, semiconductor subsector earnings are estimated to grow 117.6% in 2026 alone, compared to an estimate of 58.5% as of January 2, 2026. As always, these estimates are subject to change.

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Information Technology Index is capitalization-weighted and comprised of S&P 500 constituents representing the technology sector. The S&P 500 Communication Services Index is capitalization-weighted and comprised of S&P 500 constituents representing the communication services sector.

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View from the Observation Deck

For today’s post, we wanted to give investors a view on the performance of the S&P SmallCap 600 Index’s two styles (growth and value) over time. To do so, we chart the total returns for the S&P SmallCap 600 Growth (“SmallCap Growth”) and S&P SmallCap 600 Value (“SmallCap Value”) Indices over several time frames above. 

A note on the broader S&P SmallCap 600 Index’s recent performance:

The broader S&P SmallCap 600 Index, which serves as the parent to the SmallCap Growth and Value Indices, has outperformed the broader S&P 500 and S&P MidCap 400 Indices recently, with a year-to-date (YTD) total return of 22.7% (through July 21, 2026). For comparison, YTD total returns for the S&P 500 and S&P MidCap 400 Indices were 10.4% and 15.3%, respectively. As we see it, positive revisions to earnings estimates may support price-to-earnings (P/E) ratio expansion within the broader SmallCap 600 Index. On July 21, 2026, the SmallCap 600 Index’s earnings were estimated to increase by 19.8% year-over-year (y-o-y) in 2026, up from an estimated increase of 15.5% on December 31, 2025, according to data from FactSet.

The SmallCap Growth and SmallCap Value Indices increased to record highs this year, despite heightened volatility from the Iranian war.

Equity market volatility has been widespread this year, with the broader S&P SmallCap 600 Index’s price ranging from 1,467 (March 20, 2026) to a record 1,804 (June 30, 2026). By contrast, the SmallCap Growth Index ranged between 1,142 (March 30, 2026) and a record 1,457 (June 30, 2026), while the SmallCap Value Index ranged between 903 (December 31, 2025) and a record 1,090 (July 16, 2026).

The total returns in today’s chart, through July 21, 2026, were as follows (SmallCap Growth vs. SmallCap Value):

• 15-year average annualized (11.3% vs. 10.8%)
• 10-year average annualized (11.3% vs. 10.3%)
• 5-year average annualized (7.1% vs. 8.3%)
• 3-year average annualized (14.8% vs. 13.7%)
• 1-year (30.3% vs. 36.5%)
• YTD (23.8% vs. 21.6%)

Takeaway: As the chart reveals, near-term returns for both the SmallCap Growth and SmallCap Value Indices have been compelling. While upward revisions to earnings growth estimates are a potential catalyst behind these results, other factors, such as the Iranian war’s potential impact on U.S. monetary policy, may have introduced additional volatility. Early in the year, investors largely expected to see U.S. interest rates decline amid falling inflation. Since then, surging oil prices prompted a recalibration of those expectations. Notably, the federal funds rate futures market implied a year-end rate of nearly 4.0% on July 21, 2026, up from 3.0% at the start of the year. That said, equity markets are forward-looking and are likely adjusting for the possible decline in oil prices resulting from the war’s eventual conclusion. Comparative valuations may provide additional insight into the returns indicated in today’s chart, with small-cap stocks offering relative value to their larger peers. The S&P SmallCap 600 Index had a forward 12-month P/E ratio of 15.4 on June 30, 2026, well below the S&P 500 Index’s forward 12-month P/E ratio of 20.2 on the same date. 

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P SmallCap 600 Index is an unmanaged index of 600 companies used to measure small-cap U.S. stock market performance. The S&P SmallCap 600 Growth Index is a market capitalization weighted index. Constituents are drawn from the S&P SmallCap 600 Index. All stocks in the underlying parent index are allocated into value or growth. Stocks that do not have pure value or pure growth characteristics have their market caps distributed between the growth and value indices. The S&P SmallCap 600 Value Index is a market capitalization weighted index. All stocks in the underlying parent index are allocated into value or growth. Stocks that do not have pure value or pure growth characteristics have their market caps distributed between the growth and value indices. 

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View from the Observation Deck

Today’s post features a comparison between the total returns of the S&P 500 Growth (“Growth Index”) and S&P 500 Value (“Value Index”) Indices to see which has produced better results over time. We also discuss several factors that we believe account for the results seen in today’s chart.

As the chart reveals, growth stocks outperformed their value counterparts in all but one of the time frames.

Looking at the one-year and three-year periods, we note several catalysts to the Growth Index’s outperformance compared to its value counterpart. First, the impact of AI capital expenditure and value creation on the Information Technology and Communication Services sectors cannot be overstated. Data from FactSet shows that the S&P 500 Information Technology Index had the largest increase in year-over-year earnings (+54.8%) and revenue (+31.9%) in Q1’26, followed by the S&P 500 Communication Services Index with year-over-year earnings and revenue growth of 48.9% and 15.1%, respectively, during the quarter.

Sector weights had a significant impact on the performance of the styles over the one-year and three-year periods. 

With total returns of 27.4% and 24.8%, respectively, Information Technology and Communication Services were the second and third-best performing sectors over the trailing 12-months ended July 17, 2026. When combined, the two sectors made up 67.5% of the Growth Index on June 30, 2026. For comparison, these sectors made up just 23.5% of the weight of the Value Index as of the same date. Additionally, Communication Services and Information Technology were the leading sectors over the trailing 3-year period ended July 17, 2026, providing total returns of 114.1% and 110.4%, respectively.

The total returns in today’s chart are as follows (Growth vs. Value):

          25-year avg. annual (10.7% vs. 8.0%) 
          15-year avg. annual (16.1% vs. 11.9%)
          10-year avg. annual (17.4% vs. 11.8%)
          5-year avg. annual (13.5% vs. 11.8%)
          3-year avg. annual (24.2% vs. 14.4%)
          1-year (20.3% vs. 19.2%)
          Year-to-date (9.3% vs. 10.0%)

Takeaway: Sector performance appears to be skewing returns to the Growth Index’s favor. Notably, the S&P 500 Information Technology Index, which made up 52.3% of the Growth Index (vs. 20.6% of the Value Index) as of June 30, 2026, increased by a remarkable 2,101.3% (total return) over the 25-year period in our chart. For comparison, the S&P 500 Consumer Discretionary Index was the second-best performer, with a total return of 879.2% over the same period. A similar situation appears in near-term returns, with the Communication Services and Information Technology sector earnings and revenues far outpacing their peers. As mentioned above, the Communication Services sector, which holds a 15.2% weight in the Growth Index but just 2.9% of the Value Index, increased by 114.1%, while Information Technology increased by 110.4% over the trailing 3-year period ended July 17, 2026. That said, geopolitical unrest, heightened global inflation expectations, and growing skepticism about whether current corporate earnings can be sustained have been tailwinds to the Value Index, pushing it ahead of its growth counterpart year-to-date. Can the Value Index maintain its lead over the Growth Index through year-end? We will continue to monitor this trend and report back as conditions evolve. 

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P 500 Growth Index and S&P 500 Value Index are capped float adjusted market capitalization indexes. Constituents are drawn from the S&P 500 Index. All stocks in the underlying parent index are allocated into growth or value. Stocks that do not have pure value or pure growth characteristics have their market cap distributed between the value and growth indices. 

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View from the Observation Deck

Today’s table offers a comparison of 2-year and 10-year government bond yields across ten countries. We also include the trailing 12-month change in yields for each country’s respective tenor. We last updated this discussion in March (Global Government Bond Yields - March 2026).

Global government bond yields surged over the period captured in the table, with 10-year yields increasing in all but two countries (Canada and Switzerland) over the 12-months ended July 15, 2026.

Japan, France, and Australia saw the largest spikes in their 10-year yields, with trailing 12-month increases of 111.1 bps, 53.2 bps, and 48.8 bps, respectively. Australia, Germany, and Italy saw the largest increase in their 2-year yields, which rose by 104.7 basis points (bps), 88.2 bps, and 87.6 bps, respectively, over the period.

Higher oil prices have heightened global inflation expectations.

Since our last discussion on this topic, headline inflation increased in eight of the ten countries presented, pushed upward by surging energy prices from the war with Iran. While there have been periods of temporary relief, the recent breakdown in negotiations and re-blockade of the Strait of Hormuz leads us to believe prices could remain elevated into the back half of this year. Analysts appear to share this sentiment, with seven of the ten countries in our table showing year-end inflation forecasts that exceed current headline observations.

Most real yields (yield minus inflation) offered by 10-year government bonds declined since our last post.

Rising inflation (noted above), resulted in seven of the government bonds in today’s table offering lower real yields on their 10-year notes than they were in March 2026. The exceptions were China, The U.K., and Japan, whose real yields increased by 22 bps, 21 bps, and 11 bps, respectively. Italy, Canada, and the U.S. had the largest declines in their real yields over the period, falling 157 bps, 138 bps, and 89 bps, respectively. As shown in the column marked “12-Month Change (Basis Points)”, Canada and Switzerland were the only governments whose 10-year bond yields did not increase over the trailing 12-months.

Takeaway: The Iranian war’s impact on global inflation has been notable, with surging energy costs pushing consumer prices higher across most major economies. As we see it, the short-term bond yields in today’s table likely reflect rising expectations of higher near-term interest rates. As the table shows, China was the sole country to experience a decline in 2-year government bond yields over the past year, with the remaining observations increasing between 0.5 bps (Canada) and 104.7 bps (Australia). While oil prices have come down from their recent highs, peace between the U.S. and Iran remains elusive, threatening to reverse this trend. In the U.S., the trailing 12-month rate of change in the consumer price index declined from 4.2% in May 2026 to 3.5% in June 2026. For comparison, the price per barrel of WTI crude oil fell from $105.07 on April 30, 2026, to $69.50 on June 30, 2026. That said, oil prices have spiked again amid crumbling peace negotiations, rising to $79.60 per barrel on July 15, 2026. While the war’s duration is unknowable, we expect a cessation of hostilities could bring rapid relief to surging price indices. Stay tuned!

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing.

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