July 15, 2026
The first half of 2026 gave investors plenty to process.
Markets absorbed geopolitical instability in Iran, sharp moves in energy prices, changing interest-rate expectations, and continued debate over whether the enormous investment in artificial intelligence will ultimately justify current valuations. Despite those concerns, markets remained resilient.
That resilience is encouraging, but it does not mean the path forward will be smooth.
As we enter the second half of the year, our view is constructive but measured. Corporate earnings remain healthy, economic growth has slowed without collapsing, and businesses continue to invest. At the same time, valuations in parts of the market are elevated, geopolitical risks remain real, and investors should expect periodic volatility.
The market is beginning to broaden
Artificial intelligence and the companies supporting it remain important drivers of economic activity and market returns. We continue to believe AI represents a lasting investment cycle rather than a temporary fad.
However, the market cannot depend indefinitely on a small number of very large technology companies.
Encouragingly, earnings growth is becoming more widespread. We believe this broadening is healthy. It creates opportunities beyond the largest growth companies and supports maintaining exposure to smaller businesses, international markets, and companies with strong balance sheets and durable cash flows.
Interest rates remain an important variable
Interest rates remain one of the most important variables for investors. Markets will continue debating whether the Federal Reserve’s next move will be a rate cut, a pause, or something else entirely.
Our portfolios are not being constructed around the assumption that anyone can consistently predict the exact timing of the next Federal Reserve decision.
Instead, we believe today’s bond market offers something investors lacked for much of the previous decade: meaningful income.
Our fixed-income thesis emphasizes earning attractive current yields, maintaining moderate interest-rate sensitivity, and allowing experienced managers to move among government bonds, corporate credit, and securitized markets as relative opportunities change. We see fixed income as a source of income, liquidity, and portfolio stability—not simply as a bet on declining rates.
Our investment thesis for the second half
Our approach remains centered on several principles.
First, we want to remain invested in long-term growth. Innovation, technology investment, and corporate productivity continue to create attractive opportunities.
Second, we want broader diversification. That includes companies outside the handful of dominant U.S. technology names, smaller U.S. businesses, and international companies that may benefit from different economic cycles and currency movements.
Third, we believe risk management should be intentional. Some equity exposure in our models is designed to participate in market gains while moderating the effect of meaningful declines. This does not eliminate risk, but it can help create a more durable experience through volatile periods.
Finally, we see a growing role for private markets. Private equity, private credit, and real estate can complement traditional stocks and bonds by providing access to different return drivers. These investments carry additional costs, complexity, and liquidity limitations, so manager selection and appropriate sizing remain essential.
Upcoming portfolio adjustments
During the third quarter, we expect to make measured adjustments across many client portfolios to better reflect this outlook.
The purpose is not to predict what the market will do next month. The changes are intended to improve the long-term structure of the portfolios by clarifying the role of each investment, broadening exposure where appropriate, and aligning the balance among growth, income, diversification, and risk management.
Some strategies will be increased, others reduced, and certain allocations will be introduced gradually. As always, implementation will take individual account circumstances, taxes, and investment objectives into consideration.
We do not believe a major market event or economic report needs to occur before making thoughtful portfolio improvements. When the underlying investment case is sound, discipline is generally more valuable than attempting to select the perfect day to act.
Looking ahead
The second half of 2026 is unlikely to be quiet. Investors will continue focusing on corporate earnings, artificial-intelligence spending, interest rates, energy markets, and geopolitical developments.
There will always be reasons to worry. There will also continue to be businesses growing, innovating, paying dividends, and investing for the future.
Our job is not to eliminate uncertainty. It is to build portfolios capable of navigating it—remaining invested enough to participate in long-term growth while maintaining sufficient diversification, income, and risk management to withstand inevitable periods of volatility.
We appreciate the continued confidence you place in us and look forward to discussing these updates with you.
In the meantime, we hope you and your families enjoy the summer.
