US stock mutual funds and ETFs have delivered an impressive 11.5% total return so far in 2026, largely fueled by a two-month rally within the technology sector. This surge follows a sluggish start to the year, and the current gains are notably higher than the 7% equity-fund return observed in 2025, restoring investor confidence. The tech rally has pushed average fund returns well above the S&P 500's year-to-date performance.
Chip manufacturers were at the forefront of this rally, with strong earnings reports reassuring investors and prompting broader buying activity across growth stocks. The month of May alone contributed a 4.4% gain, building on April's substantial 10.3% rise. This momentum also significantly benefited related semiconductor ETFs, expanding the reach of the rally. Overall, the tech-driven rebound has translated into higher portfolio yields for investors.
The technology sector, specifically, saw a dramatic rebound in Q2 2026, rising 39.9% after a 5.1% decline in Q1. The Morningstar US Semiconductors Index surged 47.3% during this period, in contrast to the Morningstar US Software Index's 7.2% rise. Major beneficiaries included chipmakers, memory producers, and equipment suppliers like Nvidia, Broadcom, and Micron Technology, as hyperscalers increased AI data center spending. The Morningstar Global Semiconductors Index also saw a significant surge of 58.8%, reflecting strong performance in Asian semiconductor markets, with diversified emerging markets returning 20.8% and Pacific Asia ex-Japan gaining 23.3%.
