U.S. Stocks Post Best Quarter in Six Years in Q2 as AI and Geopolitics Drive Markets
Claire Weston
The S&P 500 gained roughly 14% and the Nasdaq 100 surged over 24% in Q2 — both the best quarterly performances since June 2020. Yet late-quarter cracks in the AI trade and rising rate-hike odds now put the rally's durability to a fundamental test.
The best quarter in six years — where did the gains come from?
As of June 30, the S&P 500 rose about 14% and the Nasdaq 100 climbed over 24%, each marking the strongest quarter since June 2020.
XTB research director Kathleen Brooks distilled the quarter into three threads: a stunning chip-and-tech rally, a stronger dollar pushing the yen to a 40-year low, and geopolitical risk repricing across commodities.
This means → the quarter was not a broad-based advance — AI and geopolitics accounted for nearly all the excess return.
How did a Middle East ceasefire lift US stocks?
Easing tensions in the Middle East were the quarter's hidden engine — the S&P 500 posted nine consecutive weeks of gains at one point.
Saterna Capital CIO Scott Klimo noted that the ceasefire, a rapid drop in oil prices, and the potential reopening of the Strait of Hormuz — a critical shipping chokepoint linking the Persian Gulf to open sea — eased inflation fears and reduced the risk of rate hikes in the second half.
In plain terms = war risk fell → oil dropped → inflation pressure eased → the Fed had fewer reasons to hike → stocks rallied.
Why did the rally stall at the end of the quarter?
In June, doubts over the AI trade resurfaced: massive capex plans and a rising probability of Fed rate hikes weighed on the tech leaders that had driven the rally.
Klimo described the pattern as a classic "buy the rumor, sell the fact" — tech-stock volatility jumped markedly from early June onward.
This reflects a market that still believes in AI's potential but is asking: with this much spending on compute, can it pay off in the near term?
Could Iran talks derail the optimism?
A new round of US-Iran talks is set to resume Tuesday in Doha, Qatar, but Iran has not confirmed specifics and has reaffirmed its commitment to controlling shipping through the Strait of Hormuz.
Capital.com senior analyst Daniela Hathorn noted that investors are still pricing in an orderly reopening of the strait and a gradual normalization of global oil flows; occasional friction reports have triggered only brief energy-market blips.
This means → the market is betting a deal gets done, but if talks collapse, oil prices and inflation expectations would reprice fast.
On the quarter's last day, who won and who lost?
AeroVironment, a drone-defense company, jumped over 20% pre-market after Q4 earnings beat expectations.
Solar-tech stocks rallied broadly on reports that the US Federal Communications Commission is drafting a rule to ban imports of foreign inverters.
On the other side, call-center company Concentrix plunged 23% after slashing its full-year guidance.
What data should investors watch next?
This week brings consumer confidence data and the latest employment report from the Bureau of Labor Statistics.
This means → these two releases are the key validation window for whether Q2's gains have fundamental backing — strong jobs and spending would underpin the rally; weak numbers would give the "buy the rumor, sell the fact" thesis more fuel.
Content is for reference only, not financial advice.