The Takeaway
Global and regional equity markets rebounded strongly in the second quarter of 2026. Style leadership reversed decisively, with growth outperforming value across every region and US size segment examined.
Growth’s stronger returns came with higher volatility and greater portfolio concentration. Growth indexes also generally remained more concentrated than value indexes, particularly in US large caps and emerging markets. However, concentration among the 10 largest holdings declined during the quarter across the US growth indexes.
Growth’s valuation premium over value widened sharply during the quarter and reached historically elevated levels. By the end of June, every valuation spread ranked above the 80th percentile of its respective historical distribution.
Across all segments, styles, and regions in the second quarter of 2026, the Morningstar Emerging Markets Growth Target Market Exposure Index delivered the highest return, at 29.70%, while the Morningstar Developed Markets ex-US Value Target Market Exposure Index recorded the lowest return, at 6.80%. Growth indexes exhibited higher volatility than their value counterparts across all regions and US size segments. The difference was most pronounced in the US broad-market and large-cap segments. Growth indexes generally remained more concentrated than their value counterparts at the end of the second quarter of 2026, reflecting the greater influence of a relatively small number of large companies within growth-oriented market segments. The difference was especially pronounced in US large caps and emerging markets.
Value indexes were generally more diversified across their constituent holdings, although concentration increased during the quarter in several value segments. Technology remained the dominant sector in the US and emerging-markets growth indexes, driven by large internet, AI, semiconductor, and electronics companies, while industrials led the Morningstar Developed Markets ex-US Growth Target Market Exposure Index. On the value side, financial services was the largest sector across all three regions.
The US showed more balanced sector exposure, while the Morningstar Developed Markets ex-US Value Target Market Exposure Index was balanced except for a larger allocation to financial services. Emerging markets were more concentrated in financial services and technology.
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