ETF Review for Q2 (and June!)

Q2 was a very good one for stocks. In fact, it was the best quarter since the big rally after the pandemic hit and plunged stocks in 2020. Stocks are up in 2026, though they are performing very differently than they have been over the past few years.

During Q2, I closed my two cannabis-related businesses, and I have been a lot more focused on ETFs and stocks. I began to write about ETFs during 2025, and I launched an ETF model portfolio at the end of the year. This is the first quarterly review, and I plan to do monthly reviews going forward. May ended on a Friday, so my weekly review for May 29th was a monthly review of sorts. Here is the initial quarterly review.

The Market

When I was growing up, the Dow Jones Industrial Average was what people used to describe the stock market in the U.S. Now, it is the S&P 500, which rose 14.8% in price and returned 15.1% with dividends during Q2. This was better than the DJIA, which returned 13.2%, but it was worse than the Russell 2000 (small-caps), which returned 21.4%, and only slightly better than the S&P 400 (mid-caps), which returned 14.3%. The big story was the weakness in mega-caps. I wrote about the challenges that the Magnificent 7 or Elite 8 have experienced in 2026 a few weeks ago.

During Q2, the strongest ETFs among those that I follow closely were the semiconductors, with iShares Semiconductor ETF (SOXX) returning 95.1% and VanEck Semi ETF (SMH) returning 71.1%. There were 9 ETFs that fell, and most of these were related to precious metals, though one that stood out was Energy SPDR ETF (XLE), which fell 12.7% after a very strong Q1. XLE is still up a lot year-to-date, though Tech Sector SPDR ETF (XLK) is now ahead of it. For Q2, the ETFs had an average return of 10.8% and a median return of 10.1%.

Fixed-income was under pressure in Q2, with the interest-rates rising across the yield curve. The 2-year Treasury increased from 3.79% to 4.16%, the 5-year rose from 3.94% to 4.21%, the 10-year Treasury lifted from 4.31% to 4.45%, and the 30-year Treasury was slightly higher, rising from 4.91% to 4.94%. This caused the overall bond market to have muted returns, with iShares Core U.S. Bond ETF (AGG) returning 0.72% This is an annualized return of 2.9% and is worse than the return on cash. The Aggregate Bond Index includes two areas beyond Treasuries, and that is Mortgages which gained a bit less, and Corporates, which I don't cover except for two funds that are defined by their maturities (short-term and intermediate-term. Looking at iShares Broad USD Investment Grade (USIG), it appears that Corporates outpaced AGG. Interestingly, high-yield bonds, which have weaker credit ratings, were much stronger.

Here are the returns and a lot of other information about the 88 ETFs that I now follow closely (after adding FNDF, FNDX and PXF):

I am attaching my data for the ETFs that I follow sorted alphabetically (readers can change the sort if they download the file):

ETF Focus List as of 06-30-26.xlsx

Download XLSX • 50KB

The Model Portfolio

While I was not positioned for such a strong rally in stocks, the Intelligent ETF Investor Balanced Model Portfolio performed reasonably well. For the month of May, the model portfolio returned 0.3%. This was better than the balanced index, which returned -0.55%. For the quarter, I don't have an exact return for the model portfolio, but the balanced index rose 9.36%. My best guess is that the ETF model portfolio rose about 5.1%. Year-to-date, the model portfolio has gained 10.25%, which is 3.9% better than the balanced index return:

I want to do a better job of performance attribution than I am offering currently. It's a very good question to ask an investor about the sources of differences between their return and the market. I had a great Q1 (being a bit under the 60% equities) at the end of Q1 and starting the year less exposed). During Q2, I started out with about 57% equity exposure in 5 ETFs, and I ended the quarter with 28.1% exposure to equities across just two ETFs.

I exited one ETF that was very large at the beginning of Q2, and SMDV, which was 18.5% of the model portfolio at the end of Q1, is up 16.6% year-to-date now. This exposure helped the model portfolio. At the same time, exposure to Bitcoin through iShares Bitcoin Trust ETF (IBIT) has hurt a bit. I added it back in June, and it is down 6.4% from my cost-basis (FIFO). I don't think the TIPS exposure has been consequential yet. Finally, while I can't quantify it precisely, trading has helped the return.

If you want access to my weekly ETF reviews, click here to see them. Also, I am now sending out real-time alerts for model portfolio trades to all who want them. I am wishing everyone a fantastic 4th of July! I still remember the 200th very well, when I was just 11. I also wish everyone good investing in July, Q3 and for the rest of 2026.