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Webcast: Market Views 2Q26

Webcast

A Record Quarter, Underneath a Narrow Rally

Q2 2026 was the strongest quarter for equities in six years, with major indices reaching new highs across market caps and styles. But underneath that headline number was a narrower story: single-sector dominance, extended momentum, and small cap leadership driven largely by unprofitable, heavily shorted names.

Top Takeaways

  • Major indices hit new highs across every size and style, with the recovery reinforced by a broad, genuine improvement in global PMIs
  • Leadership broadened away from the Mag 7, but underneath the surface the rally was narrow, driven by AI winners, high momentum and low quality
  • Unprecedented sector rotation from Energy to Tech as oil retreated and a resurgence in AI-related optimism drove Tech’s 30%+ return
  • Small cap outperformance was real but narrow, driven by unprofitable, heavily shorted names, and not owning the top 5 stocks was detrimental
  • We are seeing signs that a rotation may be underway, with Health Care, Financials & Semis leading since the 6/22 peak of the SOX index

We believe we are entering a stock picker’s market, supported by low correlations, improving fundamentals and reasonable valuations. Concentration and speculation defined this quarter’s leadership, but we don’t think that’s a durable playbook from here, and we’ve already seen signs that the momentum trade is beginning to crack. We believe we are entering an environment where disciplined capital rotation, prudent risk management and deep fundamental research should be rewarded. Explore the complete Q2 breakdown to see how we’re thinking about it.

View the Webcast Slides

 

This material is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security. Past performance is not indicative of future results. All investments involve risk, including loss of principal. Westfield Capital Management Company, L.P. is a registered investment adviser.

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