Markets continue to navigate an environment where resilient economic data continues to be offset by elevated policy uncertainty. While corporate earnings have generally remained strong, markets continue to react to changing geopolitical developments, trade policy, and shifting expectations surrounding artificial intelligence. These crosscurrents reinforce our view that maintaining a disciplined investment process remains more important than attempting to predict short term market movements. 

Policy uncertainty remains a defining characteristic of the current U.S. administration. Over the past year, markets have repeatedly experienced periods of heightened volatility following aggressive policy announcements, only to recover as rhetoric softened or negotiations resumed. Whether the issue is tariffs or geopolitical tensions, investors have become increasingly accustomed to an environment where uncertainty is created quickly but often fades just as rapidly.

Although we continue to believe diplomacy remains the most likely outcome in the Middle East, the path forward is unlikely to be linear. At the same time, the return of tariff discussions, persistent inflation concerns, and ongoing geopolitical tensions all have the potential to create additional periods of market volatility. Economic growth has remained resilient despite these challenges, but markets continue to price in a very optimistic outlook, leaving less room for disappointment should conditions weaken. This has been the tone of my personal market outlook for most of 2026, which is less concerned with economic results and more concerned with volatility fueled by uncertainty and heightened valuations.

Corporate earnings have broadly exceeded expectations, with the majority of S&P 500 companies reporting results ahead of consensus estimates. Profit growth has remained healthy across many sectors and regions, reflecting an economy that continues to expand despite elevating uncertainty. However, that said, investors have become increasingly selective on how they reward positive results. Companies demonstrating tangible returns on their investments, particularly in artificial intelligence, have continued to perform well. That said, there are many instances where share prices benefit much less, as the market has already priced in high levels of growth.

Market leadership has also become noticeably broader. While technology continues to play an important role, leadership has expanded into sectors such as Financials and Health Care, with strength also extending beyond the United States into international and emerging markets. Broader participation is generally a healthy development, although we remain mindful that equity valuations across many markets continue to reflect a significant amount of optimism.  Many businesses, although solid, are pricing in significant earnings growth that has yet to materialize.

Our portfolios remain positioned more defensively, while still capturing meaningful growth thus far in 2026.  I have always believed preserving capital during periods where valuations appear stretched, and uncertainty remains elevated provides greater flexibility to take advantage of more attractive opportunities when they emerge. While the long-term outlook for equities remains constructive, we continue to believe patience and disciplined risk management are likely to be rewarded. Maintaining liquidity and high-quality investments today allows us to respond decisively when market volatility creates more compelling entry points.

As always, our focus remains on protecting capital, managing risk thoughtfully, and positioning portfolios to benefit from opportunities as they develop rather than reacting to short term market noise.

Should you have any questions, please feel free to reach out.