Global equity markets posted one of their strongest quarters in recently memory, fueled by a strong Q1 earnings season and easing tensions in the Middel East. U.S. equities soared by just over 15%, while emerging markets stocks saw their strongest quarterly gain since 2009, rising by 24%. Bond markets saw modest returns as interest rates continued to exhibit volatility. The yield on the 10 year U.S. treasury ended the quarter well above pre-war levels but was roughly 20 bps below its post-conflict high. Commodities were one of the few asset classes to end the quarter in the red. WTI crude prices retreated from a peak of $112/barrel in early April to less than $70/barrel on June 30th. This weighed heavily on returns for the broad commodity complex.
Equity
The S&P 500 posted a 15.2% gain in Q2, marking its highest quarterly return since its 20% post-Covid snapback in the second quarter of 2020. Gains were relatively widespread across the style box. Even though most of the news surrounded the AI and semiconductor trade, value stocks turned in a quarterly return of nearly 14%, trailing their growth counterparts by just around 3% for the quarter. However, large caps were not the top performer in Q2. Small caps turned in a near 21.5% return, which corresponds to their best quarter since Q4 of 2020. Small caps benefitted from a number of tailwinds, which included attractive starting valuations, economic resilience, as well as a strong earnings season. This helped to entice investors, for the first time in quite a while, to look outside the MAG7 for potential value and growth.
Outside of the U.S., emerging markets stocks were a standout performer, rocketing higher by more than 24%. You would need to go all the way back to 2009 to find a stronger calendar quarter of performance. Emerging markets benefitted from many of the same tailwinds as small cap names but also saw a boost from their exposure to the AI supply chain. More specifically, Korean semiconductor names like Samsung and SK Hynix soared in Q2, a trend we’ve seen for much of the last year.
Fixed Income
U.S. investment grade bonds produced a total return of 0.67% for the quarter, most of which can be attributed to income rather than capital appreciation. Although near-term inflation expectations eased throughout the quarter, rates have yet to experience any meaningful relief. In terms of the yield curve, rates ended the quarter higher across all maturities. The 2-year felt the greatest pressure, rising by 37 bps, while the 10-year rose by 15 bps and the 30-year was higher by just 5bps. Municipal bonds, which were a laggard in 2025, posted a 2.50% gain in Q2 and are now higher by 7% over the last 12 months. During the quarter, munis benefited from strong demand, largely driven by their increasingly attractive tax equivalent yields.
Real Assets
Broad-basket commodities were one of the few asset classes to decline in Q2, with the Bloomberg Commodity index falling by more than 8%. This was largely driven by a sharp reversal in energy-related commodities, which had propelled the asset class higher for much of 2026. In terms of year-to-date total return, the index was higher by more than 30% at one point in mid-May. However, in just a month and a half this return was essentially halved, with the index reporting a year-to-date return of 14.36% on June 30th.
Closed End Funds
Closed end funds saw positive returns for the quarter. Discount action, however, was relatively benign. The average fund entered Q2 trading at a discount of 5.7% and ended the quarter with an average discount of 5.1%. Municipal bonds were the key driver of this. Discounts within the municipal space tightened by roughly 100 bps on the quarter, as investors continued to be enticed by their attractive tax equivalent yields. Discounts for taxable bonds also narrowed, but remain nearly 200 bps wider than their pre-Iran levels.
iCM Strategy Performance
iCM’s Tactical strategies, which utilize ETFs and/or mutual funds, performed well on an absolute basis, but saw mixed results in relative terms. Our fixed income strategy performed generally well, buoyed by our allocation to emerging markets local bonds. The equity strategy trailed its blended benchmark largely due to our overweight to value within the U.S. and an overweight to non-U.S. equities. However, on a YTD basis all strategies remain comfortably ahead of their blended benchmarks.
iCM’s Tactical Income strategies, which include TICE and TAO, also performed well on an absolute basis, but saw mixed relative results. Our fixed income strategy performed well due to an allocation to emerging markets local bonds, however the equity strategy struggled due to an overweight to non-U.S. developed stocks. Our CEF allocation was additive to relative returns, which led to outperformance for our flagship TICE strategy.
Important Disclosures
Integrated Capital Management, Inc. is an SEC Registered Investment Advisor. Registration does not imply any certain level of skill or training. Monthly “Market Flash” is intended solely to report on various investment views held by Integrated Capital Management. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security.
Past performance is no guarantee of future results. Please note that investments in foreign markets are subject to special currency, political, and economic risks. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Asset Allocation Outlook is intended solely to report on various investment views held by Integrated Capital Management. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security. Outlook may change at any time given shifting market conditions. Past performance is no guarantee of future results. Please note that investments in foreign markets are subject to special currency, political, and economic risks. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
Closed end funds are exchange traded, may trade at a discount to their net asset values and may deploy leverage. When the strategy purchases shares of a closed-end fund at a discount to its net asset value, there can be no assurance that the discount will decrease and may possibly increase. If a closed-end fund uses leverage, increases and decreases in the value of its share price may be magnified. Distributions by a closed-end fund may include a return of capital, which would reduce the fund’s net asset value and its earnings capacity. Closed end funds are offered by prospectus. The prospectus and/or other applicable offering documents contain this and other important information about the investment strategy. You should read the prospectus and/or other applicable offering documents carefully before investing. Investors should consider the investment objectives, risks, charges and expenses of the investment strategy before investing. iCM uses third-party data that is believed to be accurate and complete. All data is subject to change. All investing involves the assumption of risk and the possible loss of principal. The main risks as it pertains to iCM’s strategies are US equity risk, international equity and fixed-income market risk, interest rate risk and currency risk. While attempting to achieve the objectives of the strategies, investors will be exposed to the risk of loss from these sources along with others yet to be identified.
TICE Blended Benchmark comprised of 32% S&P 500/8% MSCI EAFE/38% Bloomberg Aggregate Bond/20% Bloomberg Municipal Bond/2% Cash
iCM TICE Alpha Opportunities Benchmarks:
TAO 35/65‐Blended Index: 26.25% Russell 3000/8.75% MSCI EAFE/63% Bloomberg Aggregate Bond/2% Cash
TAO 50/50‐Blended Index: 37.5% Russell 3000/12.5% MSCI EAFE/48% Bloomberg Aggregate Bond/2% Cash
TAO 60/40‐Blended Index: 45% Russell 3000/15% MSCI EAFE/38% Bloomberg Aggregate Bond/2% Cash
TAO 80/20‐Blended Index: 60% Russell 3000/20% MSCI EAFE/18% Bloomberg Aggregate Bond/2% Cash
iCM Income Opportunities Benchmark: Blended Index: 7.50% Russell 3000/2.50% MSCI EAFE/88% Bloomberg Aggregate Bond/2% Cash
Index Definitions
FTSE NAREIT All Equity REITs TR = U.S. REITs
S&P 500 Index = U.S. Large Cap
Russell 1000 Growth TR = U.S. Large Growth
Russell 1000 Value TR = U.S. Large Value
Russell 2000 Index = U.S. Small Cap
MSCI EAFE ND USD = Developed International Equities
Bloomberg High Yield Corp Bond = High Yield Bonds
Bloomberg Municipal TR = Municipal Bonds; BBgBarc
Bloomberg US Credit TR = U.S. IG Corp Bonds
Bloomberg Aggregate Bond = U.S. Taxable Bonds
Bloomberg Treasury TR = U.S. Treasury Bonds
MSCI Emerging Markets ND USD = Emerging Markets Equities;
JPM GBI EM Glbl Divers TR = EM Bonds;
Bloomberg Commodity TR USD = Broad Basket Commodities
First Trust Composite Closed-End Fund TR Index = Closed End Funds
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