Wall Street delivered a strong performance over the past month (as of July 3, 2026). State Street SPDR S&P 500 ETF Trust SPY has gained about 1%, the Nasdaq-100-based Invesco QQQ Trust, Series 1 QQQ has added about 1.1% and the State Street SPDR Dow Jones Industrial Avg ETF Trust DIA has outperformed its peers, returning about 3.6%, in the period.
Will Fed Turn Dovish Now?
The Federal Reserve left interest rates unchanged in mid-June for the fourth straight policy meeting, keeping the benchmark federal funds rate in the 3.5-3.75% range. The decision was unanimous, marking the first unanimous vote since last June.
The meeting was also the first under the new Fed Chair Kevin Warsh. While the Fed kept rates on hold, its projections suggest that policymakers are leaning toward keeping borrowing costs higher for longer.
However, weaker June jobs data may leave the Fed in a less-hawkish or dovish state, which may boost risk-on activities in July.
Upbeat Earnings
Total S&P 500 earnings are expected to increase by 23.7% in the June quarter of 2026 compared with the same period last year, while revenues are expected to rise 11.4% year over year.
Note that investor sentiment improved considerably during the second quarter as worries surrounding the AI trade subsided and geopolitical tensions appeared to be moving toward resolution.
Inside the Iran War
Following large-scale U.S.-Israel strikes on Iranian military infrastructure in February 2026, the United States and Iran engaged in months of warfare. The conflict severely disrupted global oil routes when Iran moved to block the Strait of Hormuz.
However, by mid-2026, the two nations signaled a ceasefire, bringing hostilities to a halt and moving toward an extended period of negotiations mediated by Pakistan. As a result, United States Oil Fund LP USO has lost about 21.9% over the past month (as of July 3, 2026).
ETF Winners
Against this backdrop, below we highlight a few winning ETFs of June that may shower further gains in July.
Invesco S&P SmallCap Consumer Staples ETF PSCC – Up 9.5% over the past month (as of July 3, 2026)
The U.S. small-cap stocks have been in good shape. The Russell 2000 index jumped nearly 22% in the first half of 2026, recording its strongest first-half performance since 1991, as quoted on CNBC. Chances of a dovish Fed may further boost the space.
iShares Residential and Multisector Real Estate ETF REZ – Up 7.4% over the past month
The underlying FTSE NAREIT All Residential Capped Index measures the performance of the residential, healthcare and self-storage real estate sectors of the U.S. equity market. A likely dovish Fed means a low-rate environment, which is a plus for the real estate stocks. The fund yields 1.94% annually.
First Trust Nasdaq Bank ETF FTXO – Up 7.4% over the past month
While a less hawkish Fed may lower short-term rates, easing geopolitical tensions and growing risk appetite related to artificial intelligence should result in a steepening of the yield curve. This kind of environment is ideal for financial stocks. Plus, rising deal and IPO activities are advantages for bank stocks.
VanEck Pharmaceutical ETF PPH – Up 5.3% over the past month
The healthcare and pharma sector is non-cyclical, providing a defensive tilt to the portfolio amid market turmoil. Further, the long-term fundamentals remain strong, given encouraging industry trends.
Also note that the Centers for Medicare & Medicaid Services (CMS) Medicare GLP-1 Bridge program, running from July 2026 through December 2027, will allow eligible beneficiaries to access covered weight-loss drugs like Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound for $50 per month. Both stocks take about 25% of the fund PPH. The move should benefit PPH.
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VanEck Pharmaceutical ETF (PPH): ETF Research Reports
Invesco S&P SmallCap Consumer Staples ETF (PSCC): ETF Research Reports
First Trust NASDAQ Bank ETF (FTXO): ETF Research Reports
iShares Residential and Multisector Real Estate ETF (REZ): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
