Quantitative Macroeconomic Outlook: Second Half 2026

This article was written by both Connor and Michael. This report is a quantitative assessment of the United States economy and equity market for the window July 2, 2026, through December 31, 2026. Every data-bearing chart in this report was computed directly from source series. Every model was fit by me, and every policy or geopolitical claim carries a primary source and an as-of date (I want to stress the last one regarding geopolitics, this article does not represent any of my beliefs, and I kept it as factual as humanly possible). The first half of 2026 was not a normal half. A new Federal Reserve chair took office in May with a hawkish mandate. An air war between the United States, Israel, and Iran, running from late February into mid-June, closed the Strait of Hormuz and pushed Brent crude above $126, a spike that then round-tripped almost entirely on an interim ceasefire. The Supreme Court struck down the tariff regime the market had spent a year pricing, and a replacement regime was rebuilt within weeks. Headline inflation reaccelerated to 4.2 percent while core held under 3 percent. Through all of it, the S&P 500 returned 9.6 percent on price and closed the half just under 7,500. The second half inherits an unusual amount of unresolved tension. The hard data and the business surveys disagree about which economy this is. Credit spreads sit at multi-decade tights while private credit defaults set records. Sector dispersion year to date spans 35 percentage points, the widest first-half spread in years. The thesis of this report is that the index-level outlook is modest and range-bound while the sector-level opportunity remains unusually large, and the evidence for that claim is laid out below.