The quarter paired Kansas City’s World Cup excitement with strong stock market gains, even as economic growth cooled, inflation remained elevated, and geopolitical tensions affected energy markets. Paragon also highlighted Trump Accounts, welcomed Tyler Novorr and Judah Schuster, and announced upcoming educational opportunities, including an “Intro to AI” webinar.
Let’s kick off with the best thing that has happened this past quarter, the World Cup came to the United States and has taken over social media! Living in Kansas City, one of the host cities, with four countries making base camp here, it is a summer of soccer. Watching tourists try Waffle House, Buc-cees, or unlimited soft drinks can’t help but put a smile on your face.
Back to Investing, last quarter told two stories that didn’t quite match. The economy slowed, and the war between the U.S. and Iran rattled energy markets, yet the stock market thrived. That gap shaped nearly everything that followed.
After a stronger-than-expected rebound in the first quarter of 2026, most forecasters now expect growth to ease rather than accelerate, and inflation progress has stalled. Even so, the Federal Reserve held rates firmly in restrictive territory and signaled that cuts aren’t coming soon.
None of that held stocks back. Corporate earnings have been impressive, and investors continue to pay premium valuations for companies viewed as structural winners, especially in technology and AI.
The overview below shows how each index performed and what fueled the divergence.
The S&P 500 and Nasdaq posted their strongest quarterly gains in years, and the explanation is straightforward. Corporate profits have topped expectations for several quarters running, and as companies kept beating those numbers, analysts kept raising their Q2 and full-year estimates.
Coming into Q2, surprisingly strong early-year data had set an upbeat tone. That tone faded a notch as the quarter unfolded. Household income and spending kept inching higher, but savings remained thin, suggesting resilience built on a fragile buffer.
Q2 has shown that this is an economy that continues to move forward, but without the momentum that would make higher rates painless. There’s enough growth to support corporate profits, but not enough progress on inflation to justify lower rates, and the fallout from the U.S.-Iran conflict is still working through oil and shipping markets, keeping investors cautious.
After notable disinflation through 2024 and into early 2025, investors entered 2026 expecting inflation to glide gently back toward the Fed’s 2% objective. Q2 disrupted that narrative. Headline inflation reaccelerated, driven partly by energy and other volatile categories, while core inflation (which excludes food and energy) stopped falling and hovered above target.
Prices are not spiraling, but moving from 3-4% back to the ideal 2% is proving much harder than the market originally thought. Wage and cost data underline the point. Firms are still facing meaningful labor and input cost pressure, and they’re passing it through where they can. That matters because it limits the Fed’s room to ease.
Kevin Warsh’s first meeting as Fed Chair in June set the tone for markets. The Fed held rates at 3.50-3.75%, but dropped its easing bias and forward guidance from the statement, turning more hawkish. His statement ran just 130 words, a fraction of his predecessor’s. Projections showed inflation revised higher, unemployment lower, and rate forecasts for coming years shifted up, with nearly half of officials expecting another hike this year. Warsh skipped his own forecast, pushing him to rely less on lagging data.
Q3 will see Q2’s GDP advance estimates and revisions, which will continue to shine a light on how the U.S. economy is moving. Beyond that, monthly releases of key inflation indicators (like CPI and PCE) and labor market updates will be worth watching.
Additionally, the Fed will meet several times throughout the quarter, which will continue to provide insight into the Fed's policy direction under Warsh’s leadership.
Last quarter showed how far markets can run even when the underlying picture is mixed. Put together, the current story is one of measured, if uneven, progress. Growth and employment are staying firm, inflation remains elevated but contained, and markets are digesting a powerful AI-driven rally.
Throughout July, eyes will turn to fresh inflation and jobs data, corporate earnings, and how the Fed moves at the July 28-29 meeting. The key questions are whether price pressures keep easing and whether profits can support current valuations. From there, it’s a matter of how shifting rate expectations feed through to stocks and bonds.
Know that we are watching how things develop and are always available if you'd like to talk through what it means for you.
Also, effective July 4th, 530A accounts, more commonly known as Trump Accounts, went live. For those who are not fully up-to-speed about Trump Accounts, they are essentially specialized, tax-advantaged individual retirement accounts tailored for U.S. children under the age of 18 and anyone with such a child or grandchild should definitely consider opening a Trump Account. Further, these accounts are particularly attractive for children born between January 1, 2025, and December 31, 2028, due to an initial $1,000 “seed” contribution from the U.S. Treasury to the account of each such child. For more information about Trump Accounts let us know and we will share a Trump Account Executive Summary (that includes details and links to how to open them, what they are investing in, how to use the funds, how they differ from 529 Plan accounts, etc.).
This past quarter we welcomed two new faces to Paragon, one full-time and one for the summer.
Tyler Novorr joined us in June after graduating with highest distinction from the University of Kansas with adual degree in Finance and Accounting and minor in Psychology. His academic excellence, strong analytical foundation, and commitment make him a tremendous addition to Paragon. Also, a huge congratulations as hepassed level 1 of the CFA the Monday after graduation.
Judah Schuster joins us this summer for a finance internship. Judah is a honors student studying Finance at the University of Kansas School of Business. Judah is part of the Business Leadership Program and a member of Alpha Epsilon Pi fraternity. Judah will graduate in May 2027 and hopes to pursue a career in wealth management.
We hope you were able to tune in for our two Town Hall meetings on June 30th. If not, a recording is available on our YouTube channel listed under “How to stay informed.” You will soon be receiving invitations to our July “Intro to AI” webinar where we will discuss basics about AI and answer your questions and concerns and address those that were expressed in our recent survey.
Our website and YouTube channel offer a wealth of information. You can find our videos through our website at:https://www.paragoncap.com/quarterly-market-insightsor on our YouTube channel at https://youtube.com/@paragoncap. If you subscribe to our YouTube channel by hitting the “subscribe” button, you will be notified when new videos are posted.
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