Near-Term Volatility. Long-Term Gains.

*Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

Market Close 2nd July 2026.

The Russell 2000 was one of the market’s standout performers again this week, continuing its impressive run and extending to fresh all-time highs. The index has now enjoyed its strongest first-half performance since 1991, underscoring a meaningful shift in market leadership away from the narrow, mega-cap-driven rally that dominated much of the past two years.

HYG — Junk Bond Watch

HYG posted a modest gain this week, continuing to reflect healthy conditions in the corporate credit market. While the move wasn’t dramatic, the ETF’s resilience reinforced the message that investors remain comfortable taking on credit risk despite mixed economic data and continued uncertainty over the timing of Federal Reserve rate cuts.

Why it matters for stocks:

• When HYG is strong, it suggests investors are comfortable taking risk and credit markets remain supportive of equities.
• When HYG weakens, it often signals growing concern about economic growth, rising default risk, tighter financial conditions, or declining liquidity.

Margin Debt as a Share of Money Supply Back Near Dot-Com Extremes

Source: Seeking Alpha — Max Gottlieb, June 30, 2026

Investor leverage is flashing another cautionary signal, with margin debt as a share of M2 money supply climbing to its second-highest level in history, trailing only the dot-com bubble peak, according to SoFi.

The ratio is now well above the highs seen before the financial crisis and above the 2021 speculative surge, according to a SoFi chart circulated by Barchart.

The move reflects how much risk appetite has returned. Investors are borrowing aggressively against a money-supply base that is no longer expanding the way it did during the pandemic. This is an informational data point and should not be read as a prediction of future market performance.

Small-Caps Just Had Their Best First Half Since 1991

Source: Barron’s — Jacob Sonenshine, July 6, 2026, p. 28

It was a messy and volatile week for markets. The S&P 500 advanced 1.8%, the Dow Jones Industrial Average rose approximately 2%, and the Nasdaq Composite gained 2.1%. The small-cap Russell 2000 finished the week off 0.4%.

But those weekly figures fail to capture the changes happening beneath the surface. Despite strength in the S&P 500 and the Nasdaq, chip stocks tumbled, with the VanEck Semiconductor ETF (SMH) finishing the week down approximately 3.2%. The losses came amid concerns that Meta Platforms’ decision to sell cloud computing capacity could signal excess supply in the sector.

Meanwhile, the Russell 2000 just finished the best first half of a year since 1991, gaining 22% compared to the S&P 500’s 10%. For some observers, this signals that investors are broadening their horizons beyond technology.

“Portfolio managers are looking for other opportunities outside of owning AI.” — Jason Ware, Chief Investment Officer, Albion Financial Group

While the Federal Reserve is more likely to raise rates than cut them given persistent inflation, falling oil prices — WTI crude has dropped from a peak above $110 a barrel to roughly $68, near its pre-Iran war level — combined with modest job growth could be enough to keep the Fed on hold despite a roughly 46% probability of a hike at the September FOMC meeting.

Historically, expectations for a rate hike have tended to be favorable for small-cap stocks. According to Jefferies strategist Steven DeSanctis, small-caps have gained approximately 10% on average in the six months heading into a hike while outperforming large-caps, in large part because the environment typically reflects a strong and accelerating economy. These are historical observations and are not a guarantee of future performance.

DeSanctis expects Russell 2000 earnings to grow by 15.7% by year-end. While small-caps are not inexpensive — the iShares Russell 2000 ETF (IWM) trades at just over 26 times forward earnings, a 28% premium to the S&P 500 — that kind of earnings growth could make the valuation more palatable. These are analyst estimates, not a guarantee of future results.

Historically, the Russell 2000 has outperformed the S&P 500 by 10 points or more in the first half of a year on only three occasions since 1987, and it continued to outperform over the following 12 months in two of those three instances. Past performance is not indicative of future results.

Investing in 250 Years of American Innovation

Source: Mitch on the Markets — Mitch Zacks, July 4, 2026

As readers celebrate the July 4 holiday with family, we’re reminded that for nearly 250 years, the United States has been an engine of invention, innovation, and growth. Over time, new industries have formed, productivity has improved, living standards have risen, and companies have been created, scaled, merged, disrupted, replaced, and reinvented.

One of the remarkable features of U.S. innovation is that it rarely comes from a single invention or a single company. History shows that progress builds in layers, with one breakthrough creating the infrastructure for the next. The integrated circuit, for instance, started as a practical solution to a physical problem — computers could not keep growing if every connection had to be soldered by hand. By shrinking electronics onto microchips, it helped make possible everything from space exploration to factory automation to smartphones and artificial intelligence.

The automobile offers another example. Henry Ford did not invent the car, but the Model T and the moving assembly line changed the economics of transportation. By reducing assembly time from more than 12 hours to roughly 90 minutes, Ford helped turn the automobile from a luxury product into something much closer to a mass-market good.

Throughout history, the U.S. economy has been remarkably good at taking ideas and building systems around them — in the form of factories, supply chains, financing mechanisms, distribution networks, public markets, and consumer ecosystems. The result is that inventions become industries, and industries become sources of earnings, employment, productivity, and wealth creation.

But perhaps the most remarkable feature of it all is that everyday investors can own a slice of the U.S. economy and all the innovation and growth it creates — through the ability to buy stocks.

What’s more, investors do not need to identify every breakthrough company in advance to participate in American innovation over time. A diversified equity portfolio provides exposure to the evolving American growth engine while reducing the risk that any one company, product, or theme fails to live up to expectations.

As we look ahead, artificial intelligence may be the next major chapter in this long American innovation story. There will be disruption, and some jobs and business models will undoubtedly change. But investors should be careful with the idea that every task or industry touched by AI will simply disappear. That has not been the pattern with major technologies before. Computers did not eliminate work as many believed they would — there are over 250,000 data scientists in the U.S. today, a job that did not exist prior to the computer’s invention.

Bottom Line for Investors

American innovation and economic growth have been powerful forces at work since the country’s founding. But 250 years of growth does not mean the path has always been smooth. The country has endured recessions, depressions, wars, inflation shocks, banking crises, political uncertainty, market crashes, and speculative bubbles — and has emerged from each of them.

The investor’s job is not to predict every breakthrough or identify every future market leader in advance. The investor’s job is to stay positioned to participate in the broader system that turns innovation into growth. The stock market is not a perfect reflection of American innovation, but it has historically been one of the most accessible ways for investors to participate in it.

Innovation compounds value, and investors who remain patient and diversified give themselves the opportunity to compound with it over time.

What I’ll Be Focused On This Week

The items below reflect Richard Naso’s personal areas of focus for the coming week and are provided for informational and educational purposes only. They do not constitute investment advice or a recommendation to trade any security.

WATCH LIST — WEEK OF JULY 6, 2026

• PMI for June
• FOMC Minutes
• Existing Home Sales
• Advance/Decline Line

Monitoring market breadth throughout the week

The final two trading days of June had the appearance of institutional distribution, but I believe much of the selling reflected differences in market consensus and the typical end-of-quarter portfolio realignment rather than a wholesale shift in investor sentiment. While some profit-taking was evident — particularly in large-cap technology — the action beneath the surface remained constructive.

The behavior of the Russell 2000 (IWM) and high-yield bonds (HYG) continues to suggest that investors are still willing to embrace risk and are positioning for continued economic growth rather than a recession. Improving market breadth, firm credit markets, and relatively stable Treasury yields are all encouraging signs that the bull market remains intact.

For long-term investors, however, the bigger picture has changed very little. Periods of consolidation and increased volatility are a normal part of any advancing market. While maintaining a cautious stance over the coming weeks is prudent, I continue to believe that a disciplined, long-term investment approach remains sound for investors with a longer-term investment horizon.

– Richie

This content (“Content”) is produced by Richard Naso. The Content represents only the views and opinions of Mr. Naso, who is compensated by TradeZero for producing it. Mr. Naso’s trading experiences and accomplishments are unique, and your trading results may vary substantially from his. TradeZero does not endorse the Content and makes no representations or warranties with respect to the accuracy of the Content or information available through any referenced or linked third-party sites. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security.

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