Friends,
We hope you had a Happy 4th of July!
As you may be aware, the second quarter was marked by a remarkable rebound in financial markets, continued strength in the U.S. economy and the ongoing race to lead in artificial intelligence. While geopolitical concerns, including the war in Iran and periodic spikes in oil prices, created volatility throughout the quarter, financial markets proved to be remarkably resilient. Through June 30, domestic stocks were up roughly 10% year-to-date, foreign stocks were also up approximately 10% and the bond market was modestly positive. Given that we entered 2026 after three consecutive years of double-digit stock market returns, and then experienced a difficult first quarter, the recovery during the second quarter has been encouraging. The rebound was driven by solid corporate earnings, a resilient consumer, continued economic growth and renewed enthusiasm around technology and AI-related companies. The AI race continues to be a major force behind capital spending, productivity expectations and market leadership, particularly in semiconductors, data centers and other infrastructure needed to support future growth.
What’s the outlook? Tailwinds include strong corporate earnings, a stable labor market, continued investment and productivity improvements related to AI, and a resilient U.S. economy. Headwinds and risks include geopolitical surprises, oil market volatility, sticky inflation and potentially higher interest rates. We are also concerned about increasing speculation and the use of leverage we are seeing in the financial markets. Given the current backdrop, our inclination is to remain cautiously optimistic but also to be thinking about having conversations with clients regarding goals and risk tolerance and stress-testing portfolios to mitigate downside risks. “Chasing” what has worked recently or the latest hot idea is not our “M.O.” for prudently managing portfolios for the long term.
We look forward to having these conversations with our clients in the coming months. Let us know if you have any questions or if we can do anything for you….and thanks as always for your support and encouragement.
Matt and Andrew