Market Outlook and Commentary Q2 2026

Our Outlook, Your Portfolio

Our team manages a variety of strategies, and your own asset mix is comprised of a recipe unique to you, including risk management strategies, equity exposure, fixed income plays, and other portfolios. The investment accounts that we managed were recently rebalanced. We’re sharing our insight, but for a more detailed look at your accounts, and how these outlooks impact your portfolio, feel free to contact your advisor. 

Portfolio Rebalance: Refinement in a More Selective Market

Markets evolve, and so must portfolios. Our latest rebalance reflects a shift in how we express risk—not a retreat from it. While the macro environment remains broadly supportive for equities, we believe the market is entering a phase where precision and diversification matter more than bold, concentrated positioning.

The result: we are maintaining a pro-risk stance while deliberately redistributing exposures to build a more resilient portfolio.

Staying Risk-On, But More Intentional

We continue to see economic growth, solid corporate earnings, and a continued disinflation trend despite some volatility in energy prices. 

The regime that rewarded highly concentrated bets is fading. Rather than doubling down on the biggest winners or the most crowded factors, we are taking profits where appropriate and reallocating risk more intentionally across sectors and regions.

This rebalance is ultimately about improving the quality and balance of our exposures while staying invested in the themes we continue to believe in.

Strengthening the AI Opportunity

Our conviction in artificial intelligence remains strong—but the opportunity set has evolved.

Earlier in the AI cycle, broad exposure to large-cap technology companies captured much of the upside. Today, however, AI is reshaping competitive dynamics across industries, creating both winners and losers within and beyond the technology sector.

We are positioning portfolios to capture value across the broader AI ecosystem by:

• Maintaining exposure to core AI infrastructure builders
• Increasing focus on companies adopting AI to enhance productivity and margins
• Leveraging active managers capable of identifying opportunities as value shifts across software, semiconductors, and adjacent industries

Recent divergence between software and semiconductor companies illustrates how rapidly the AI landscape can evolve. Going forward, we expect greater dispersion in returns, making active selection increasingly important.

Moderating Regional Equity Tilts

While we remain constructive on global equities, we are dialing back some of our most pronounced regional bets.

• U.S. equities: Trimmed modestly after strong performance, though the long-term earnings outlook remains compelling.
• Emerging markets: Reduced following a strong run, particularly in markets linked to the semiconductor supply chain supporting AI demand.
• International developed markets: Our underweight is narrowed slightly, though structural growth exposure remains less compelling relative to other regions.

This shift reflects a broader theme of the rebalance: reducing concentration and broadening opportunity sets without abandoning core convictions.

Expanding Global Defense Exposure

We are increasing exposure to defense companies, an area supported by powerful structural tailwinds.

Rising geopolitical tensions and shifting global security priorities point toward a potential multi-year increase in defense spending worldwide. Rather than maintaining a narrow focus on U.S. aerospace names, we are broadening our exposure globally to capture beneficiaries across the defense supply chain.

This diversified approach allows us to participate in the theme while reducing reliance on a single segment of the industry.

Reinforcing the Role of Bonds

On the fixed income side, we are repositioning the bond sleeve to better serve its intended purpose: acting as a stabilizer when equity markets become volatile.

Credit spreads across investment grade, high yield, and emerging market debt are currently near historically tight levels. In other words, investors are being paid very little for taking additional credit risk.

As a result, we are:

• Reducing credit-heavy exposures
• Increasing allocations to higher-quality government bonds
• Extending duration modestly

These changes aim to ensure that bonds behave more like a true portfolio shock absorber, rather than echoing the same risks embedded in equities.

Locking in Gains Where Appropriate

We are also taking profits in areas that have delivered exceptional performance.

Gold, for example, has rallied significantly. While the long-term case remains intact, disciplined portfolio management requires recognizing when positions have run ahead of fundamentals. Realizing gains allows us to redeploy capital into areas with more attractive forward-looking risk-reward.

A Clear Approach to Geopolitics

Geopolitical risks remain elevated and are closely monitored. However, history shows that markets often treat geopolitical developments as short-term noise rather than durable investment signals.

Instead of reacting dramatically to headlines, we are acknowledging these risks while focusing on structural themes—such as AI adoption and global defense spending—that are likely to drive returns over longer time horizons.

The Bottom Line

This rebalance is not about stepping back from risk—it’s about taking smarter risk.

By maintaining our equity overweight while diversifying exposures, strengthening AI positioning, broadening defense allocations, and reinforcing the bond sleeve, we are aiming to build portfolios that are better suited for a market environment where selectivity, diversification, and active management matter more than ever.

The themes we believe in remain firmly intact. What’s changing is how precisely we express them.

Investing involves serious risks and past performance is no guarantee of future performance or success. This is not an offer to buy or sell securities and nothing contained herein should be interpreted as a recommendation regarding any investment or investment strategy. Before making any decision to invest, first read the relevant disclosures and important information provided to you.
Investments are NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE