U.S. equities advanced during the holiday-shortened week, although market leadership became less uniform. The Dow reached a new record closing high, while the S&P 500 finished the week higher, and the Nasdaq encountered renewed pressure from weakness in semiconductors and other AI-linked shares. The divergence is worth watching. Investors remain enthusiastic about long-term innovation themes, but elevated expectations are making portions of the technology sector increasingly sensitive to disappointment. Economic reports showed continued expansion but also showed clearer signs that the labor market is cooling. June payroll growth slowed to 57,000 jobs, with prior months revised lower, while the unemployment rate held near 4.2%. Although the data do not signal an immediate recession, they suggest the economy may be transitioning toward a slower pace of growth, an outcome that could give the Federal Reserve more flexibility if inflation remains contained. Geopolitically, the U.S.–Iran ceasefire largely held, commercial shipping through the Strait of Hormuz continued to improve, and lower oil prices helped ease inflation concerns. Congress also advanced major bipartisan housing legislation to address the nation’s persistent supply shortage. While federal legislation alone cannot solve affordability challenges created by high mortgage rates, local zoning constraints, construction costs, and years of underbuilding, policies that encourage additional supply are directionally positive for the long-term economy. With all three major market indexes posting strong gains through the first half of 2026, investors who have remained disciplined and focused on their long-term investment plans have continued to be rewarded despite periodic bouts of volatility.

U.S. & Global Economy

• Recent economic activity continues to point to a resilient, though uneven, global expansion. In the United States, consumer spending and business investment remained supportive of growth, while inflation continued to moderate gradually, allowing the Federal Reserve to maintain its patient, data-dependent approach to monetary policy. Overseas, Europe continued to struggle with modest growth, and China remained dependent on policy support to stabilize domestic demand. Meanwhile, progress in U.S.-Iran negotiations and the continued reopening of the Strait of Hormuz helped reduce pressure on global energy markets, with oil prices falling back toward pre-conflict levels as supply disruptions eased. While geopolitical risks remain and negotiations are ongoing, the near-term outlook has improved. More importantly, the longer-term investment case for the United States remains exceptionally compelling. As the accompanying chart (from Capital Group and the World Bank) illustrates, the U.S. now invests nearly $1 trillion annually in research and development—roughly double China’s spending and well ahead of every other major economic region. The scale of U.S. research and development spending is one reason we remain constructive on the country’s long-term investment outlook. The United States combines deep capital markets, leading universities, an extensive venture-capital ecosystem, strong intellectual-property infrastructure, and an unusual capacity to commercialize new technologies at scale. Those advantages have supported leadership in artificial intelligence, biotechnology, defense, software, energy, and advanced manufacturing. However, investors should distinguish between technological leadership and investment returns. Great innovations do not automatically make every innovation-linked stock a great investment, particularly when expectations and valuations are already elevated. The long-term opportunity is real, but price still matters. We continue to believe these structural advantages make the U.S. one of the most attractive long-term investment destinations in the world.

Policy and Politics

• The geopolitical environment remains considerably more stable, although investors should not assume risks have disappeared. The interim halt in direct U.S.–Iran hostilities remained broadly intact, despite continued tensions. The resulting decline in energy prices has eased concerns that higher oil costs could derail the global economy or complicate the Federal Reserve’s inflation-fighting efforts. Brent crude finished the holiday-shortened week near $72 per barrel, while West Texas Intermediate traded near $69—dramatically below the levels reached during the most intense phase of the conflict. Although the recent progress is encouraging for consumers, businesses, and financial markets, the region remains inherently volatile, and any setback in negotiations or renewed military activity could quickly reverse these gains. For now, however, geopolitical risks appear to be moving in a more constructive direction, removing one of the more significant headwinds facing the global economy and financial markets, which we see as a positive economic marker for the second half of 2026. The Federal Reserve’s annual stress tests provided another constructive signal. Even under a hypothetically severe recession that would generate more than $700 billion in projected losses, the nation’s largest banks would remain above minimum capital requirements and be positioned to continue lending. This does not eliminate financial-system risks, but it reinforces our view that today’s banking system enters the second half of 2026 with considerably stronger capital buffers than in past crisis periods.

As the second half of 2026 begins, the investment backdrop remains constructive but increasingly nuanced. Economic growth continues, while the June employment report suggests the labor market is cooling. Inflation pressures have eased but geopolitical risks remain, and elevated valuations mean investors will demand evidence that heavy spending on artificial intelligence translates into durable profits and productivity gains. The key question is whether the economy can slow enough to ease inflation and interest-rate pressures without undermining corporate earnings. We believe that the outcome remains achievable, though the path is unlikely to be smooth. For long-term investors, diversification, disciplined rebalancing, and avoiding emotional reactions to short-term headlines remain essential. Importantly, investors who have remained disciplined and stayed invested through the market’s periodic bouts of uncertainty in 2026 have been rewarded, reinforcing the value of maintaining a long-term perspective rather than reacting to short-term headlines. Please contact the team at Valley National Financial Advisors with any market-related questions.

Economic Numbers to Watch This Week

• U.S. Services PMI for June 2026, prior 50.7
• U.S. ISM Report on Business Services PMI for June 2026, prior 54.5
• Global Services PMI for June 2026, prior 51.3
• U.S. Monthly Wholesale Trade for May 2026, prior 0.6%
• U.S. Federal Open Market Committee Meeting Minutes for June 2026 meeting
• U.S. Consumer Credit for May 2026, prior 20.7B
• U.S. Initial Jobless Claims for Week Ended July 4, 2026, prior 215K
• U.S. Existing Home Sales for June 2026, prior 4.2M

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