Global markets rebounded sharply in the second quarter of 2026 as geopolitical tensions eased, oil prices retreated from crisis levels, and corporate earnings exceeded expectations. A conditional U.S.–Iran ceasefire and the reopening of the Strait of Hormuz early in the quarter removed much of the risk premium that had built up in March. The Federal Reserve held policy steady at both its April and June meetings, leaving the federal funds target range at 3.50% to 3.75%. Kevin Warsh succeeded Jerome Powell as Chair during the quarter, and at the June meeting the Committee removed language signaling a bias toward future cuts, with the median participant now projecting a modestly higher policy rate at year-end.

U.S. equities advanced strongly, more than reversing first-quarter losses. The S&P 500 returned approximately 15.2% for the quarter, its strongest quarterly performance since the second quarter of 2020, led by information technology as capital spending on AI infrastructure accelerated. Energy was the weakest sector, declining roughly 13.5% as crude prices unwound the first-quarter shock. Small-capitalization stocks outperformed for a second consecutive quarter, with the Russell 2000 rising approximately 21.5%.

International equities were broadly higher and outperformed U.S. large-cap equities. The MSCI EAFE Index rose approximately 10.8%, supported by attractive valuations and improving earnings, while emerging markets led all major regions, with the MSCI Emerging Markets Index gaining roughly 24.1% on the strength of Asian semiconductor and technology markets. The broader MSCI ACWI ex U.S. Index finished sharply higher. Policy diverged abroad, as the European Central Bank raised its deposit rate 25 basis points to 2.25% and the Bank of Japan lifted its policy rate to roughly 1.0%.

Fixed-income markets posted modest gains despite higher yields, as credit spreads tightened and income offset duration losses. The Bloomberg U.S. Aggregate Bond Index returned approximately 0.7% for the quarter. High-yield credit again outperformed, with the Bloomberg U.S. Corporate High Yield Index rising roughly 2.5% amid strong investor demand, leaving investment-grade and high-yield spreads near 20-year tights. The 10-year U.S. Treasury yield ended June near 4.44%, up from 4.30% at the end of March, while the 2-year rose more sharply to 4.14% from 3.79%, flattening the curve as expectations shifted from rate cuts toward a possible hike.

Commodities reversed course after their first-quarter surge. The Bloomberg Commodity Index returned approximately -8.1% on a total return basis, though it remains up 14.4% year-to-date. Gold declined roughly 14.1%, its worst quarter since 2013, as safe-haven demand faded and the revised rate outlook raised the opportunity cost of holding a non-yielding asset. West Texas Intermediate crude ended the quarter near $70 per barrel, down from above $100 earlier in the year, as supply concerns receded.

As of June 30, 2026, OCERS’ portfolio had a market value of $30.3 billion, up from $28.1 billion at the end of the first quarter. OCERS’ portfolio generated a quarterly return of 8.2% relative to the policy benchmark return of 7.4%.