SEI Forward.
Second quarter 2026.
SEI Forward: Second quarter 2026
Market review
We entered the second quarter with equity markets challenged by war in the Middle East, as investors struggled with concerns over growth and inflation, along with how the Federal Reserve (Fed) would act with an impending change in leadership. As we exit the quarter it’s clear equity markets, at least for now, have met those challenges as stocks generally sit just below all-time highs reached in early June, while inflation remains hot and sticky.
Markets have reacted to geopolitical volatility with impressive resilience . Although war news flow flip flopped between talks of ceasefires and truces versus sporadic attacks, both sides seem to be generally leaning into de -escalation. Crude oil suffered its largest quarterly decline since COVID -19, but longer term there are still numerous concerns. Tankers and cargo ships have begun to trickle out of the Strait of Hormuz, though we aren’t seeing inbound ships, nor do we know what maritime traffic in the re gion will look like after the conclusion of hostilities . Strategic reserves have been drawn down in the U.S., while China has drastically reduced its oil purchases . Damage to infrastructure will take years to repair. Obviously, these concerns may put more upward pressure on inflation longer term , but for now at least oil’s impact on inflation may be more muted than we witnessed earlier this year.
Inflation is becoming broader based , especially in services , and demand is generally outstripping supply across large swaths of the global economy. This is what we believe will ultimately drive the Fed to hike rates after being widely expected to continue cutting earlier this year . Meanwhile, U.S. 10 -year Treasury yields have mostly fluctuated between 4% to 4.5% , indicating a market fairly complacent in its pricing of long -term inflation and policy rates .
Our perspectives on market challenges and opportunities.
Important information.
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