Halfway through 2026, the headline is reassuring. U.S. equities recovered from a spring pullback that, at its worst, took the S&P 500 down approximately 9% from its high into the late-March low, and have since climbed back to around record levels, leaving the index higher for the year. Volatility has drained away, the spring’s conflict-driven anxiety already reads like a footnote, and by at least one widely watched measure of sentiment, investors are about as giddy as they have been since 2021.
That is the headline. As usual, the more useful story is the one underneath it — and this year, the gap between the two is unusually wide.
Start with what went right, because a great deal did. By late May, according to UBS, the S&P 500 had recovered past its pre-conflict levels entirely and returned to record territory. The path there was textbook for this decade. Bespoke Investment Group notes that 2026 has been one of the strongest years for “buying the dip” since at least 1993, and that the VIX recently closed near 15, its lowest since early January.
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