Quarterly Market Update (Summer 2026)

Although we continue to live in a world at odds with itself, markets have generally kept climbing upward. Stocks spent most of the second quarter rebounding from the March selloff, led primarily by artificial intelligence leaders, particularly within the semiconductor industry. While we have recently seen this relentless move experience a breather, we view it as a temporary and healthy consolidation, rather than a sustained decline. Whether or not this cycle ultimately culminates in an investment bubble, this period will likely be remembered as a profoundly transformative era for the global   economy.

Geopolitics continue to exert a persistent influence on portfolio management. The ongoing nature of the conflict involving Iran remains a central focus, even if there is a temporary truce. Predictably, energy prices have moved higher from the start of the year. Until there is a concrete resolution, the risk of further volatility remains elevated. Global oil stockpiles continue to dwindle, and supplies remain below pre-war levels.

A similar dynamic is playing out in natural gas, which has become a vital cog in the evolving global energy landscape, serving as a critical bridge from traditional fossil fuels to an electrified future. Should the conflict persist, the broader economic ramifications are significant, ranging from the negative impact of reduced fertilizer exports on global food supplies to the restriction of crucial helium exports required by the semiconductor industry.

Naturally, we need to spend some time on the evolving AI narrative. At first it was all about Nvidia’s GPUs and model training, then last year, the spotlight shifted to the massive power infrastructure and industrial capacity required to build out data centers. This year, memory stocks are having their moment in the sun. As agentic AI and its real-world use cases expand, significantly more memory and storage are       required to facilitate inference, the process by which an AI model utilizes its knowledge to "think" and generate output.

Equally compelling is the sheer volume of capital being deployed into this buildout. Hyperscalers continue to live up to the term, as they revise their capital expenditure targets upward, pouring hundreds of billions of dollars into infrastructure. Unlike the telecom bubble of the late 1990s, where networks were built years ahead of actual demand, there is no spare capacity today. However, because these tech giants are funding these massive expenditures through cash flows and, increasingly, debt, we must question the long-term sustainability of this pace. Furthermore, these same     companies were previously among the largest buyers of their own shares. Corporate buyback activity has slowed noticeably in the wake of this infrastructure spending. A reduction in marginal buying may not matter while broader market sentiment is bullish but remains an important variable over the longer term.

AI is a revolutionary technology, and it is here to stay, but like any technology, it ultimately fades into the background. Most of us pay little attention to the fact that we now carry around the internet, and everything it facilitates, on a little slab in our pockets. We do not want to downplay the immense excitement from a technological or investing standpoint, but some perspective is due, especially when the hype seems abundant. While we are weary of the possibility of a pullback in the coming months, we would expect that the bull will keep charging ahead thereafter.

As always, please reach out with any questions or concerns. Enjoy the summer, now that it finally feels like it is here.

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Index Descriptions:
The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the USA.
The Russell 2000 Index is a stock market index that tracks roughly 2000 US small companies, and is considered a key benchmark for US small cap stocks.
The MSCI EAFE Index is a stock market index that measures the performance of large- and mid-cap companies across 21 Developed markets countries around the world. Canada and the USA are not included. EAFE is an acronym that stands for Europe, Australasia, and the Far East.
The MSCI Emerging Markets Index captures large and mid-cap representation across 24 Emerging Markets (EM) countries.
The Bloomberg US Aggregate Bond Index, or the Agg, is a broad based, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the USA.
 
 
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