Equity Takeaways from Our H2 2026 Economic & Market Outlook
Published July 21, 2026
Jeff Weniger, CFA
Head of Equity Strategy
Brian Manby, CFA
Equity Strategist
Key Takeaways
- The equity bull market is expected to continue through the second half of 2026, supported by resilient U.S. growth, AI investment and solid earnings.
- With the Federal Reserve expected to stay on hold, resilient earnings could continue supporting U.S. Growth stocks despite lingering inflation pressures.
- U.S. small caps look attractive thanks to compelling valuations, easing rate expectations and diversification beyond today's mega cap leaders.
We believe the bull market will continue through the second half of 2026.
Our recently published H2 2026 Economic and Market Outlook, What the New 'Warsh' Cycle Means for Markets, is summarized below.
Macroeconomy
- The U.S. economy is on strong, stable footing, with data volatility (especially in oil dynamics) reflecting temporary, exogenous interruptions rather than long-term, structural disruptions.
- We anticipate continued economic growth in the second half, fueled by AI capital spending. Street consensus earnings growth for this year and next is ambitious but doable.
- With oil erasing most of its war-driven gains, we expect soft inflation prints this summer. However, inflation remains structurally higher than the Fed’s longstanding 2% target; collapsing energy prices may only provide partial relief.
Monetary Policy
- The Kevin Warsh-led Fed will challenge the policymaking and communication status quo. Forward guidance will be significantly reduced, while the Fed may start consulting different data sources in its monetary policy operations.
- Given the rolling nature of oil’s war-induced volatility, along with the overall health of the U.S. economy, we don't see a strong case for meaningful federal funds policy action. We expect the Fed to remain firmly on hold for the remainder of 2026, confounding the consensus expectation of one or two quarter-point hikes between now and yearend.
Geopolitics
- The conflict with Iran appears to have peaked in Q2. While intermittent flare-ups are likely, the geopolitical risk to equities has abated, allowing markets to refocus on tariffs, China, and AI. The pivot from “headline risk-to-bottom line risk” is something investors should welcome.
Equities
Most of our stock market views have not changed materially over the last half year. The biggest is stocks versus bonds. Our Models team continues to overweight equities.
We recently upgraded Growth in U.S. equities. We would characterize that as neutral within the broader Growth-versus-Value framework. Our regional bias is toward the U.S. relative to developed and emerging markets. We’re also bullish small caps over large caps.
Our upgrade to Growth rests on earnings resilience, which we think is thematic for the next several quarters. In short, both Growth and Value will see earnings leap in 2026 and 2027, owing to the lagged effect of outgoing Fed Chairman Jay Powell’s monetary easing campaigns of 2024 and 2025. The magnitude and extent of the pop in Growth stocks’ earnings should enable the group to grow into its valuation.
We expect U.S. corporate earnings to continue outpacing non-U.S. peers, some of whom may be more hamstrung by further Iran flare-ups than the energy-independent United States.
Lastly, because small caps tend to have more floating-rate debt than large caps, we believe small caps stand to benefit as the market reduces its expectations for one or two quarter-point rate hikes over the remainder of the year. Additionally, we argue that the group trades at a compellingly cheap valuation, a multiple reminiscent of its differential relative to large caps that preceded seven subsequent years of outperformance from 1974–1981. Small caps’ relative valuation is also akin to the differentials witnessed before they embarked on their legendary 2000–2017 besting of large caps. If nothing else, small cap exposure may be a hedge to a market that has become mega-cap growth-dominated.
While volatility may increase under a more data-dependent Federal Reserve and a fluid geopolitical landscape, we view pullbacks as distractions, rather than reasons to abandon risk assets altogether. Investors who remain disciplined should be well positioned to navigate the second half of 2026 and beyond.
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About the contributors
Jeff Weniger, CFA
Head of Equity Strategy
Jeff Weniger, CFA, has been with WisdomTree since 2017 and serves as the Head of Equities. He shapes the firm’s market outlook through a combination of macroeconomic and fundamental analysis. With more than two decades in investment strategy, Jeff is known for his work on market cycles and valuations. Before joining WisdomTree, Jeff was with BMO Private Bank and BMO Global Asset Management for 11 years. At BMO, he sat on the firm’s Asset Allocation Committee and co-managed ETF model portfolios across the U.S. and Canada. In 2013, at age 32, he became the youngest member of BMO’s Global Investment Forum. When he left BMO to come to WisdomTree, his final role was Director, Senior Strategist in the Office of the CIO in 2017.
Jeff is a frequent television guest on networks such as CNBC, Bloomberg, and Schwab, with regular print appearances in The Wall Street Journal, Barron’s and Reuters. He also appears weekly on the Behind the Markets podcast and is a regular on SiriusXM’s The Business Briefing. On X, Jeff has developed one of the larger followings in financial media. He earned a B.S. in Finance from the University of Florida and an MBA from the University of Notre Dame. He has held the CFA charter since 2006.
Brian Manby, CFA
Equity Strategist
Brian Manby is an Equity Strategist at WisdomTree and part of the Investment Strategy team.
He is responsible for developing and communicating equity market insights, investment themes, and portfolio strategies that support the firm’s ETF and investment solutions platform. He evaluates sectors, valuations, fundamentals and equity styles to identify investment opportunities and provide actionable perspectives to clients and advisors. He also helps investors understand how WisdomTree’s equity strategies can be used to achieve long-term investment objectives in evolving market environments.
Brian joined WisdomTree in October 2018 as an Investment Strategy Analyst after a few years as a Consultant for FactSet Research Systems, Inc. He earned a B.A. in Economics and Political Science from the University of Connecticut in 2016 and has been a Chartered Financial Analyst since 2022.