July 13, 2026

RUN THE BALL!

Don't look now, but the high flying hyperscalers may be handing the ball off to the workhorses in the trenches. The Mag 7 is actually (finally) lagging the other 493 S&P stocks for the year. With that relationship, general intuition would assume we are in a bear market. But, the market is up almost 10% on the year. In fact, it ripped up 14% for the second quarter.

The market has predictably shrugged the Iran conflict and has focused on actual results. It seems the market is distilling the AI check cutters from the AI check cashers. Microsoft, Meta, Oracle, Nvidia, Amazon, and Palantir are burning cash on AI like they are actually trying to catch a ride to Mars with Elon and SpaceX.

And standing right there to cash those checks are companies like Dell, Caterpillar, and Travelers. We've talked a lot that the AI theme is not only about tech. It's about the picks and shovels that will be the beneficiaries. That rotation of performance inside the S&P 500 is what we are talking about.

We always preach to avoid the hype and invest; don't speculate. That process never goes out of style.

Run the ball.

“You are what your record says you are!” Coach Bill Parcells had it right. Earlier this year, the market looked like a losing team, down double digits during the tariff-driven drawdown. But after some halftime adjustments, the scoreboard now shows a 14.8% gain year-to-date. This isn’t a 28–3 Patriots-Falcons Super Bowl comeback, but the score is the score.

Market resilience has carried the season - balancing solid economic growth against heightened policy and geopolitical risks. The game isn’t over yet.

Market Performance

U.S. Equities (S&P 500) YTD: +9.6%

International Equities (MSCI ACWI ex-U.S.) YTD: +13.4%

Fixed Income (Bloomberg U.S. Aggregate Bond Index) YTD: -0.9%

Alternative Market Neutral (Lipper Global Alternative Long/Short Equity Index) YTD: +7%

Gold: -7.1%

Bitcoin: -34%

Key Highlights and Commentary

U.S. Equities: The Storm Gave Us Whiplash

At the beginning of the second quarter, the S&P 500 was off about 6%. Now it stands up double digits. It's been quarterly performance post-pandemic. "This time is different" proved itself to be one of the world's most dangerous lines of thinking in investing.

We got a new Fed chair. He got handed a slightly hotter rate of inflation and excellent corporate earnings. He seems content to wait and see before proceeding with changes in interest rate policy.

International Equities: The Breakout Is Holding the Line

The story of the quarter was some pushback from the Dollar. Fed Chair Walsh's seeming contentness to hold rates steady caused the Dollar to appreciate against rest of world currencies for the quarter. The structural case of cheaper valuations, broader industry participation, and less concentration risk than the U.S. is still in tact, we just had the greenback leaning hard against that.

Gold: Whoosh!

After making a new all-time high at over $5,500 an ounce in late January, gold has been hit by a dump truck trading down around $4,000 an ounce - it's worst quarterly decline since 2013. A stronger dollar and rising yields shifts the appeal from a non-yielding asset like gold. We're still comfortable with our disciplined profit taking earlier in the year and underweight allocation. The long-term structural case - central bank buying, fiscal deficit concerns, geopolitical hedges, and currency diversification - is still in tact. However, the short term path is completely muddy.

Fixed Income: Yields Are Your Friend

I'm not sure if bonds were boring last quarter, but they weren't exactly scary. The income generated was mostly offset by rising yields. We still see many attractive opportunities for moderate returns in bonds, without taking significant risk. Coupled with the diversification benefit they provide against equities, we are still squarely in the camp of defining our allocation to fixed income and diversifying like crazy inside of it.

Digital Assets: Lookout Below!

If gold's correction was sharp, Bitcoin's was downright brutal. After peaking near $125,000 in June of 2025, Bitcoin has gone straight down the alpine slides of Colorado to $58,000. Unlike prior crashes, and there are many, there is no real agreed upon fundamental reason for the decline. The story like follows some of the same reasons as gold, then add in the high correlation Bitcoin has held to the hyperscalers and that probably gets you in the neighborhood. If the correlation to the hyperscalers holds, then we may start viewing Bitcoin as a leveraged -hyperscaler position versus an asset that does it's own thing and provides an additional return stream. Until then, it's best managed through disciplined rebalancing. Sell and take profits at the ceiling thresholds and buy at the floors.

Key Takeaways – Portfolio Positioning

Temper equity exposure following the quick rebound. The speed of the rally is a reason in itself to take the same action as the prior market decline: rebalance. We're trimming our overall equity allocation, while remaining slightly overweight. This will show up primarily through refunding the U.S. sleeve specifically which we still believe is the highest quality market in the world. However, rather than deploying through a market-cap weighted approach that would allocate in a high concentration to the Mag7 and hyperscalers, we're utilizing flexible active strategies that will provide more broad exposure. That includes our long-term thematic positions in AI and Defense. We believe these are two of the most durable growth stories in the market and short term events like a hawkish Fed or Middle East tensions will not disrupt their long-term structural forces.

Looking Ahead

The macro environment got a little noisy in the last quarter, but the key tenets are still in place. We've been expecting cooling inflation, solid earnings, accommodative Fed policy, and stabilizing trade dynamics. We got all of those except cooling inflation. While an accommodative Fed is on hold for the moment, the course hasn't reversed.

Noise is expected. When it's quiet, that's when your radar should go up. Until then, we'll run the ball.

As always, if you’d like to discuss how these views impact your portfolio and financial plan specifically, please connect with us here.

Key Takeaways – Portfolio Positioning

Looking Ahead

Noise is expected. When it's quiet, that's when your radar should go up. Until then, we'll run the ball.

As always, if you’d like to discuss how these views impact your portfolio and financial plan specifically, please connect with us here.