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Economic Trends · Jul 6th, 2026
What this video’s about
In this episode of The Market Share, Paul Gifford, Chief Investment Officer at 1st Source Bank, welcomes Senior Portfolio Manager Jason Cooper for a midyear review of the equity markets.
The first half of 2026 has been anything but predictable. Markets began the year with heightened volatility before recovering to new highs. Along the way, investors have shifted their attention from excitement around artificial intelligence to a more important question: Which companies can turn AI investment into lasting earnings growth? Paul and Jason discuss what drove the market’s recovery, why earnings continue to matter most, and what investors should watch during the second half of the year.
A volatile start followed by a strong recovery
The year opened with a challenging first quarter. Higher-for-longer interest rates and geopolitical uncertainty weighed on investor sentiment, and the S&P 500 declined about 7 percent by the middle of March, including a 4 percent drop during March alone.
Jason explains that the decline reflected a market reset. Earnings expectations became more realistic, valuations adjusted, and leadership began shifting toward different sectors and companies.
The recovery that followed was equally significant. The market rallied roughly 13 percent in a relatively short period, with April gaining about 10 percent before another strong advance in May carried the index to new all-time highs.
Importantly, Jason notes that the rebound was supported by fundamentals rather than optimism alone. Corporate earnings exceeded expectations, and continued investment in artificial intelligence helped support growth, particularly among large-cap companies.
More recently, markets have entered a period of consolidation. While the major indecies remain near their highs, leadership beneath the surface continues to rotate among sectors and investment styles.
The AI story is entering a new phase
Artificial intelligence remains one of the market’s most influential themes, but Jason believes the conversation is evolving.
“The conversation around AI is starting to shift from excitement to evidence,” he explains.
Over the past two years, investors broadly rewarded companies connected to AI, including semiconductor manufacturers, cloud providers, and infrastructure companies. Going forward, however, markets are becoming more selective.
The focus is no longer simply on participation in the AI story. Investors want to see measurable results through stronger revenue, expanding profit margins, or new sources of earnings. Companies that can demonstrate those outcomes are more likely to distinguish themselves from those benefiting only from the excitement surrounding AI.
Earnings will shape the second half of the year
Looking ahead, Jason believes earnings will remain the market’s most important driver.
The economy has remained resilient and corporate profits have held up well. At the same time, much of that growth has come from a relatively small group of companies.
For the market to continue advancing on a stronger foundation, Jason says leadership needs to broaden. More sectors and companies will need to contribute to earnings growth rather than relying on a handful of market leaders.
“The market has had strong leadership,” Jason says, “but going forward it will require proof: proof in earnings durability, proof in broader participation, and proof in the fundamentals that justify current valuations.”
Staying balanced in a changing market
Rather than making concentrated bets, Jason encourages investors to remain disciplined.
That means maintaining diversified portfolios, owning high-quality companies, and focusing on businesses whose fundamentals support long-term growth. While market leadership may continue to evolve, a balanced approach helps investors participate in opportunities without becoming overly dependent on any single trend.
Conclusion
The first half of 2026 demonstrated how quickly markets can shift from uncertainty to opportunity. Strong earnings and continued innovation helped fuel the recovery, but the next stage of the market will depend on broader participation and sustained corporate performance.
Stay informed with The Market Share for thoughtful insights that help you understand the trends shaping today’s markets and tomorrow’s investment opportunities.
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