Q2 2026: PFM Quarterly Commentary
One question we often hear from clients is why we remain so deeply passionate about the markets after all these years. We fully understand that many people view investing with a healthy dose of skepticism, indifference, and apathy, and that’s fine. That’s why we’re here.
For those of us who engage with the vast investment markets daily, they are an endless source of fascination, drama, and intrigue. They deliver the full spectrum of human emotion: the thrill of victory, the agony of defeat, and nearly everything in between. On any given day, the experience can feel like an epic saga worthy of Braveheart; on another, it may resemble the tawdry spectacle of a Jerry Springer episode. Above all, the markets remain the grand, never-ending soap opera and are a joy to participate in.
Beyond the thrill, the markets demand a remarkably broad and versatile skill set to navigate effectively. A deep understanding of current events, geopolitics, fiscal and monetary policy, accounting, writing, statistics, and mathematics only scratches the surface of the tools we draw upon each day. Equally vital is the ability to analyze and synthesize large volumes of data, then apply those insights to real-world situations in real time, often under pressure, which only adds to the richness of the experience.
For anyone, at any stage of life, who is considering whether to delve more deeply into the markets, we wholeheartedly encourage you to do so. More than almost any other discipline, investing and finance consistently delivers personal fulfillment while ensuring there is never a dull moment. What’s more, the learning never stops. There are always new concepts to explore and new challenges to master, making portfolio management a truly lifelong endeavor that sharpens one’s understanding of the evolving world.
Now that we’ve reached the midpoint of 2026, it’s a good time to apply some of this perspective to the remarkable events of the first half of the year. The period was marked by several major (and in some cases entirely unexpected) headline developments: the raid and capture of Nicolás Maduro in Venezuela in January, the outbreak of war in Iran in February, a sharp spike in crude oil prices that reignited inflation concerns in March and April, a change in leadership at the Federal Reserve in May, and the largest IPO in history with SpaceX in June.
Understandably, many investors anticipated that such events would destabilize markets or at least trigger significant volatility. Yet that was largely not the case. As we’ve cautioned for years, investing based on headlines is rarely a winning strategy as markets have a well-documented tendency to move in the opposite direction of what conventional wisdom expects. Over time, we’ve seen numerous examples of media “experts” misjudging how markets would respond in real time to major news.
A recent example can be found in the behavior of crude oil prices during the first two quarters of 2026. For context, there is no single global “oil market.” It is a highly fragmented landscape involving different regions and grades of crude. For our discussion, we’ll focus on the most widely referenced benchmark in the U.S.: West Texas Intermediate (WTI) Light Sweet Crude futures contracts.
The all-time high for WTI occurred during the infamous “super spike” of July 2008, when prices briefly reached an intraday high of $147.27 per barrel.i At the time, the world was in the depths of the Global Financial Crisis, which was already suppressing demand, and no notable supply disruptions occurred in key producing nations. In short, there was no single clear “villain” driving that surge.
By contrast, WTI began 2026 trading at $48.05 per barrel on January 1. Following the outbreak of conflict in Iran, by early March, prices spiked to an intraday high of $110.23-a substantial 130% gain from the start of the year.ii While that percentage increase is noteworthy, the absolute price level never approached the 2008 peak.
For background, Iran accounts for roughly 5% of global oil supplyiii and, more importantly exerts significant influence on the Strait of Hormuz where approximately 20% of the world’s oil consumption typically transits.iv Prior to the conflict, most analysts would have projected that a sustained closure of the Strait combined with direct kinetic engagement involving Iran would create one of the largest supply shocks in modern history, easily pushing prices well beyond the 2008 highs. Given that the 2008 super spike occurred without a comparable supply or demand shock, surpassing that level amid such severe disruption would not have seemed like a stretch.
In the weeks following the hostilities in Iran, predictions of record-high oil prices were widespread. Reality, however, unfolded quite differently. After reaching its early March peak, WTI never again touched $110 per barrel and ultimately closed the second quarter down approximately 37% from that high.v
As we frequently observe, the “obvious” path for any asset is often the one that fails to materialize. When prices move contrary to prevailing conditions and expert consensus, it warrants close attention. In this case, oil’s inability to sustain levels anywhere near its 2008 high, despite ideal conditions for it, suggested that prices were headed meaningfully lower and that the conflict could potentially prove shorter-lived than most pundits suggested.
The broader stock market told a similar story. Amid elevated global tensions, concerns over oil scarcity, and rising inflation, expectations of a significant market correction, slowing global growth, or even recession were commonplace. Instead, markets worldwide delivered strong results in the first half of 2026. The S&P 500 rose 10.2%, while some even riskier segments outperformed further still. For example, the MSCI Emerging Markets Index gained 24.0% and the tech-heavy Nasdaq Composite advanced 13.1%.
This pattern of markets moving against conventional wisdom appeared across numerous asset classes. Consumer inflation rose from 2.7% in December 2025 to 4.2% in May 2026 (June data pending), which should theoretically have pressured rate-sensitive assets like bonds and real estate while supporting inflation hedges such as precious metals. Yet the results were the reverse:
- Bonds were positive across the spectrum. The Bloomberg U.S. Aggregate Bond Index (investment grade bonds) rose 0.62%, the Markit iBoxx Liquid High Yield 0-5 Year Index (high yield or junk bonds) gained 2.0%, and the Bloomberg U.S. TIPS Index (inflation protected treasury bonds) returned 1.15%.vi
- Real estate, as measured by the FTSE Nareit REITs Total Return Index, posted its strongest first-half performance since 2021, rising 17.8%.vii
- Precious metals (Aberdeen Standard Physical Precious Metals Index) declined 11.9% after a strong multi-year runup.viii
Many other asset classes similarly defied expectations with robust gains:
- Small-cap stocks (S&P SmallCap 600 Index): +23.9%ix
- Mid-cap stocks (Dow Jones U.S. Mid Cap Total Return Index): +23.3%x
- Broad commodities (SummerHaven Dynamic Commodity Index): +19.8%xi
- International developed stocks (FTSE Global ex U.S. All Cap Index): +12.9%xii
- Domestic large-cap value stocks (S&P 500 Pure Value Index): 11.75%xiii
Even within the S&P 500, the industrials sector, arguably the most sensitive to rising energy costs, was the top performer among the eleven sectors, advancing 20.2%. At the subsector level, airlines, which are highly exposed to fuel prices, might have been expected to suffer significantly. Instead, the U.S. Global Jets Index rose 18.9% over the first six months.xiv
If asked in early January to forecast the direction and magnitude of price changes across these asset classes given the events of the first six months of the year, most observers likely would have predicted precisely the opposite outcomes. While striking, this phenomenon is not isolated and recurs with enough frequency to reinforce a central lesson we highlight regularly: attempting to predict the future is a fool’s errand. No one can do so consistently or reliably. A more reliable approach is to observe actual price action and inter-asset relationships, identify underlying drivers, and interpret what the market is communicating: analyze and react, rather than predict.
While this disciplined, evidence-based approach may lack the thrill of bold forecasts or complex black-box quantitative models, it has informed our decisions and served us well through the many challenges of recent years.
As always, we are deeply grateful for your continued trust and for the privilege of serving as your advisor. We hope you can relax and enjoy the summer season with family and friends. Please know that we are always here and readily available should any questions arise.
If you are receiving this quarterly statement by mail and would prefer an electronic version going forward, please do not hesitate to let us know.
Regards,
Peak Financial Management
Disclosures: This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third-party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way whatsoever. This presentation may not be construed as investment, tax or legal advice and does not give investment recommendations. Any opinion included in this report constitutes our judgment as of the date of this report and is subject to change without notice.
Indexes are unmanaged, statistical composites, and their returns do not reflect payment of fees an investor would pay to purchase the securities they represent. Such costs would lower performance. It is not possible to invest directly in an index. The indexes include a different number of securities and have different risk characteristics. Past performance of the indexes and benchmark is no indication of future returns.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website, www.adviserinfo.sec.gov. Past performance is not a guarantee of future results.