Investment Performance
Q2 2026 Report
Thank you for choosing Seattle Foundation as your partner in philanthropy. We know that you share our commitment to creating a region of shared prosperity, belonging, and justice. We appreciate your confidence in us to manage your assets in service of a greater goal: fostering a community where everyone can thrive.
Market Conditions
The second quarter of 2026 saw a sharp reversal from the defensive tone of the first quarter, as U.S. and non-U.S. equities rallied strongly following an early-April ceasefire that eased the acute phase of the Iran conflict. Smaller companies and non-U.S. markets again outpaced U.S. large caps, with emerging markets posting their strongest quarterly gain in more than a decade and developed international markets also comfortably ahead of the S&P 500. Growth-style equities reasserted leadership over value during the quarter, as renewed enthusiasm for artificial intelligence and technology themes drove much of the advance, interrupting, the value-led trend that had been in place since late 2025. The Federal Reserve held its policy rate steady at both its April and June meetings, maintaining a measured stance after 75 basis points of cuts in 2025, while the U.S. dollar continued to strengthen over the quarter, extending its rebound off the multi-year low reached earlier in the year. Elevated valuations among the largest U.S. companies, particularly AI-related mega caps, continued to stand out relative to less expensive non-U.S. peers.
Investment-grade bonds produced a modest positive return for the quarter, as coupon income outweighed a choppy path for interest rates: yields drifted higher through the middle of the quarter on sticky inflation readings before easing in June as growth and labor market data softened. High-yield corporate bonds also advanced, supported by coupon income and credit fundamentals that remained resilient despite the more volatile macro backdrop. The shape of the yield curve continued to reflect a similar set of cross-currents as the prior quarter with ongoing economic growth, fiscal imbalances, and inflation that remains above target, layered on top of emerging labor market softness and the disinflationary effects of technology advancement.
The U.S. economy moderated over the second quarter, with the unemployment rate at 4.2% in June and second-quarter GDP growth of approximately 1.5% (advance estimate), down from 2.0% in the first quarter. Job gains continued in professional and business services, social assistance, and health care, while leisure and hospitality employment declined and growth elsewhere in the labor market was largely flat. Wage growth held near 3% year-over-year. Headline inflation ran hotter than in the first quarter, with the 12 months ending in June showing headline CPI at 3.5%—driven mainly by an energy price spike tied to the conflict earlier in the quarter that reversed sharply in June—while core inflation, which excludes food and energy, held closer to target at 2.6%. Heightened geopolitical and trade-policy uncertainty continued to weigh on business investment decisions.
Achieving mission-aligned returns will require navigating uncertainty while accepting complexity. The Foundation is positioned for lasting achievement by spreading investments across different assets, carefully evaluating valuations, and performing its own research, particularly as new information emerges that challenges commonly held viewpoints.
Portfolios
The Balanced Pool is the Seattle Foundation’s primary investment pool and is actively managed to deliver returns at 5% plus CPI over the long term; it maintains a diversified portfolio that includes exposure to global equity markets, alternative investments, and more conservative asset classes such as U.S. fixed income. In the most recent quarter, the Balanced Pool returned 10.3%* and over the last 10 years, the Pool has gained 9.3%* annualized. The pool’s diversified strategy makes a compelling case for its positioning, supporting its north star of preserving capital while pursuing long-term growth.
In addition to the Balanced Pool, we offer other investment options to meet our fundholders’ needs. Our Socially Responsible Pool, designed to meet ESG (Environmental, Social, and Governance) requirements while also providing competitive economic returns, returned 8.6% for the quarter. Our Intermediate-Term Pool, designed to meet the expectations of donors with a grantmaking horizon in the two- to seven-year range, returned 4.4% for the quarter. The Foundation also manages a Short-Term Pool for donors with very short grantmaking horizons; this pool is intended to preserve capital as best as possible and returned 0.8% for the quarter. Lastly, the Foundation offers an Index Pool, which is fully passive, and a Growth Pool; these pools returned 10.3% and 9.4%, respectively, for the quarter.
We are thankful for the opportunity to support you in creating powerful, rewarding philanthropy to make our region a stronger, more vibrant community for all. We welcome your questions and comments.
Sincerely,
Jason Malinowski
Chair of Investment Committee
* Updated 8/21/26
