• Stocks close lower with geopolitical tensions in focus – U.S. equity markets closed lower on Monday, as escalating tensions between the U.S. and Iran sent oil prices higher and weighed on investor sentiment. Over the weekend, the U.S. carried out additional military strikes against targets in Iran, while Iran responded by launching strikes against U.S. facilities in several Gulf countries. President Trump also announced Monday that the U.S. would reinstate its blockade on Iranian shipping, contributing to a further rise in oil prices and bond yields as geopolitical tensions re-escalated. From a market-leadership perspective, defensive sectors—including utilities and consumer staples—outperformed, as did the energy sector. Technology was a notable laggard, weighed down by weakness among semiconductor companies as investors continue to reassess whether the robust pace of spending on components needed for the AI buildout can be sustained. Technology weakness was particularly acute overseas, with South Korea’s KOSPI Index—which is heavily weighted toward semiconductor companies—falling nearly 9% overnight. Looking ahead, investors face a week packed with corporate earnings reports and economic data, with all eyes on bank earnings and the June consumer price index (CPI) report tomorrow.
   
• Price check ahead – Inflation will be front and center for investors this week, with June consumer price index (CPI) data due tomorrow. Headline CPI is expected to post a modest monthly decline, likely driven by a fall in oil prices, while rising 3.8% on an annual basis. Core CPI, which excludes food and energy, is expected to increase 0.3% for the month and 2.9% from a year ago. The run-up in prices over recent months has led investors to recalibrate their expectations for Federal Reserve interest-rate policy. Bond markets are now pricing in one Fed rate hike by the end of this year and an additional hike in 2027. While we acknowledge that upside risks to inflation have increased—particularly amid ongoing uncertainty in the Middle East—we believe the current backdrop warrants a patient approach from the Fed, and we expect it to remain on hold in the near term. Core goods prices posted their lowest reading in more than a year in May, while recent home-price data point to further shelter disinflation ahead. Additionally, labor-market conditions have come into better balance and, in our view, are no longer a meaningful source of inflationary pressure. The number of job openings is now only slightly higher than the number of unemployed workers, compared with 2022, when job openings were nearly double the number of unemployed workers. Although geopolitical uncertainty remains a risk, our base case is that oil prices will remain well below their March peak of more than $100 per barrel. Against this backdrop, we believe the Fed can remain patient and keep rates on hold in the near term.
   
• Second-quarter earnings preview – In addition to inflation data, corporate earnings will be in focus for investors, with Bank of America, JPMorgan Chase, Goldman Sachs, Wells Fargo, and Citigroup all scheduled to report results tomorrow, kicking off the second-quarter earnings season. For the quarter, analysts expect the S&P 500 to post year-over-year earnings growth of 22%, driven by strong profit growth in the technology and energy sectors. Technology earnings are expected to grow by roughly 61% from a year ago, bolstered by continued spending related to the AI buildout. Meanwhile, energy earnings are expected to more than double, benefiting from higher oil prices during the second quarter. For the full year, S&P 500 earnings are expected to grow by 24%. If realized, that would mark the strongest annual profit growth since 2014, excluding the post-pandemic recovery period. We continue to believe the economic environment remains supportive of equities, underpinned by stable labor-market conditions and resurgent manufacturing activity. In our view, these conditions should support solid earnings growth over the coming quarters and provide a favorable environment for equity markets.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Stocks edge higher to close out the week – U.S. equity markets closed higher on Friday, with investors awaiting a busy week ahead of economic and earnings data, headlined by U.S. bank earnings and consumer price index (CPI) inflation for June. From a leadership perspective, most S&P 500 sectors finished the day flat to higher, led by communication services and materials. Contrarily, health care was the only sector to finish in the red. Bond yields were little changed on the day, with the 10-year U.S. Treasury yield finishing at 4.56% and the 2-year yield at 4.2%. Geopolitical tensions remain in focus after a re-escalation in military activity between the U.S. and Iran this week. However, with no incremental news flow on the conflict, oil prices were little changed Friday, with WTI crude oil closing just below $72 per barrel.
   
• Investors eye a busy week ahead – Key economic data and corporate earnings results will likely be front and center in the week ahead. On the economic front, we’ll get a read on inflation, with the consumer price index (CPI) out on Tuesday and producer price index (PPI) inflation for June out on Wednesday. We’ll also get a look at recent consumer spending trends, with retail sales for June due Thursday, along with a slew of housing market data on Friday. Corporate earnings will also be in focus, with several large U.S. financial services institutions slated to announce second-quarter results and analysts calling for S&P 500 second-quarter earnings growth of nearly 25%. On the economic side, we’ve seen resilient activity in recent months, characterized by stable labor-market conditions, solid consumer spending trends, and a resurgence in manufacturing activity. This has come despite persistent inflationary pressure, with headline and core CPI posting annual gains of 4.2% and 2.9%, respectively, in May — well above the Federal Reserve’s 2% inflation target.
  
  In our view, the current economic backdrop remains favorable for equity markets, underpinned by healthy economic activity and stable earnings growth. Specifically, we believe opportunities are attractive in U.S. large- and mid-cap stocks — which should benefit from strong earnings momentum, along with a solid economic backdrop, in our view — as well as in emerging-market equities, which can provide investors with global exposure to the technology and AI theme while the MSCI Emerging Markets Index trades at a slight discount to its 10-year average forward price-to-earnings multiple.
   
• Higher interest rates weighing on housing – After a surge in activity coming out of the pandemic, driven by low borrowing costs and households that were flush with cash, housing-market activity has stagnated in recent years as households adjust to higher home prices and higher borrowing costs. We saw further evidence of this yesterday, with existing home sales for June falling by 2.4% for the month, below expectations, albeit modestly higher on a year-over-year basis. Since 2023, monthly existing home sales have run at an annualized rate of roughly 4.1 million, well below the 2015–2019 average of roughly 5.4 million. While this could, in part, reflect low levels of inventory for existing homes in recent years — as existing homeowners have been reluctant to sell homes with below-current-market mortgage rates — new home sales show a similar pattern, trending roughly sideways since 2023. While we don’t expect borrowing costs to return to 2021 levels, we think there is hope for improvement on the affordability front, particularly as annual wage growth has outpaced home-price growth, as measured by the S&P/Case-Shiller U.S. National Home Price Index, for 15 consecutive months. Should this trend continue over time, it could provide improvement at the margin for housing-market activity. From an economic standpoint, while housing-market activity could remain subdued this year, the good news, in our view, is that we’ve seen solid trends in other drivers of growth, such as household consumption and business investment, which we believe will be the primary drivers of economic growth over the remainder of the year.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Stocks edge higher – U.S. equity markets traded higher Thursday, supported by gains in the technology sector which helped lift broader indexes. The Nasdaq outperformed, gaining more than 1%, while the S&P 500 posted a 0.8% advance. Overseas, markets were broadly higher as well, with Asian equities led by a gain of more than 1% in Japan’s Nikkei, while European markets also traded higher. On the economic front, initial jobless claims for last week came in slightly below expectations at 215,000, pointing to continued stability in the labor market. Additionally, existing home sales for June were weaker than expected, falling 2.4% for the month, as the recent run-up in longer-term interest rates has likely weighed on housing activity. Bond yields finished the day slightly lower, with the 10-year Treasury yield settling around 4.55%. In commodity markets, oil prices closed lower, though investors continue to monitor this week’s geopolitical flare-up between the U.S. and Iran, which has helped push WTI crude oil higher by more than 4% for the week.
   
• Positioning portfolios amid the recent rotation – After a strong run in technology stocks following the March lows, markets have experienced a rotation into more value-oriented sectors since the beginning of June. Health care, financials and industrials have been among the top performers over this period, while technology has lagged, declining by roughly 5% through yesterday's close. Even so, the sector remains up more than 17% year-to-date. In our view, the weakness in technology reflects a combination of profit-taking after a sharp rally from the March lows and growing scrutiny around whether the current pace of AI-related capital spending can be sustained — and ultimately generate an adequate return — particularly as elevated memory prices increase the cost of the AI buildout.
  
  Despite these concerns, fundamentals within the technology sector remain solid. Earnings growth is expected to remain robust in 2026, and there are limited signs that companies are meaningfully slowing AI-related spending. In fact, estimates continue to point to substantial capital spending tied to AI infrastructure, while analysts expect technology and communication services to grow profits by 52% and 23% respectively in 2026. Against this backdrop, we remain overweight technology-heavy asset classes such as U.S. large-cap stocks and emerging-market equities. However, we recommend balancing this exposure with overweights to more economically sensitive areas, including U.S. mid-cap stocks. At the sector level, we continue to recommend an overweight to communication services, which has lagged year-to-date but offers exposure to several AI-related beneficiaries. We also favor industrials, which should benefit from continued infrastructure spending and an ongoing rebound in manufacturing activity.
   
• Jobless claims remain contained, signaling steady labor-market conditions – Initial jobless claims for last week came in at 215,000, slightly below expectations of 220,000 and modestly lower than the prior reading of 217,000. So far in 2026, initial claims have averaged roughly 213,000, well below the 30-year median of more than 300,000. This suggests that layoffs remain contained, a view reinforced by the unemployment rate declining to 4.2% in last Friday’s June employment report. While 2025 was characterized by both low hiring and low firing — with nonfarm payroll growth averaging roughly 10,000 per month and initial jobless claims averaging 226,000 — labor-market conditions have improved this year. Job growth has strengthened, while both the unemployment rate and initial claims remain contained. Over the past three months, nonfarm payrolls have increased by an average of 111,000, compared with an average monthly gain of 92,000 year-to-date. Overall, we would characterize labor-market conditions as stable. Low unemployment and modest hiring growth should continue to help support economic activity over the remainder of the year.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Stocks fall amid Middle East tension - Geopolitics were back in the spotlight today after President Trump declared the ceasefire between the U.S. and Iran over, raising the prospect of an end to peace talks and the potential for renewed fighting between the two countries. The U.S. launched a fresh wave of strikes and revoked Iranian oil waivers, while Iran retaliated by striking military bases in Kuwait and Bahrain. In response, oil prices jumped 4.8% to about $74 per barrel, up from $68.5 at the start of the week, but still well below the $120 level seen at the start of the conflict in March. Stocks finished lower, though the pullback was contained, with the Dow lagging but the Nasdaq ending largely unchanged. Treasury yields rose as the jump in oil prices risks reigniting inflation concerns.
   
• Similar risks, different reaction? - The spike in oil prices and higher bond yields drove a near 10% correction in the first half of the year, but they also underscored the economy’s resilience to these shocks. Renewed geopolitical risks may fuel some near-term risk-off sentiment, but we do not expect investors to react to this round of uncertainty in the same way, for several reasons. First, neither the U.S. nor Iran appears inclined toward a prolonged conflict, in our view, and investors have already seen how reacting to fast-moving headlines can lead to suboptimal portfolio outcomes. Second, we think it would likely take a much larger and sustained rise in oil prices to materially alter the outlook for the economy and corporate earnings. Finally, oil supplies have begun to recover, providing a renewed buffer for energy markets, while the improving labor market helps support household incomes—even as the tailwind from higher tax refunds fades.
   
• Tech rotation adds to risk-offsentiment - After the semiconductor index posted its best quarter on record, the group has turned more volatile, and investors are increasingly questioning the pace and payoff of AI-related capex. Today, semiconductor stocks rebounded, helping the Nasdaq, even as the high-flying Korea equity index closed overnight 20% off its June peak. We are seeing signs of fatigue, with end-user demand for AI becoming more price sensitive and the market starting to penalize companies that ramp spending too aggressively. That said, there are still no clear signs of a meaningful slowdown in demand or investment. The tech sector is expected to deliver the highest revenue growth of all 11 S&P 500 sectors in the second quarter, along with the second-highest earnings growth rate at 63%. However, given the parabolic moves, elevated concentration risk, and the outsized weight of technology in the index, we think investors should complement their exposure with more differentiated sources of return.
  
  Our preferred approach is a barbell strategy: maintain exposure to tech, but balance it with cyclicals. For cyclical exposure, we favor U.S. mid-caps and the industrials sector, which should benefit from infrastructure spending, onshoring trends, and continued adoption of artificial intelligence, automation, and robotics, in our view. For AI exposure outside traditional tech, we favor Communication Services. We think the sector offers meaningful participation in AI beneficiaries, but with less stretched valuations relative to history and still-robust earnings growth. In our view, this provides a more balanced way to express the AI theme without relying solely on the most crowded areas of the market.

Angelo Kourkafas, CFA;
Investment Strategy

^{Source for all data: Bloomberg.} 

• Stocks edge lower amid tech weakness and renewed geopolitical tension – U.S. equity markets traded lower on Tuesday, as weakness in technology shares weighed on the broader indices. Semiconductors were a notable laggard within technology, with the PHLX Semiconductor Index falling more than 4% on the day. The decline followed preliminary second-quarter results from Samsung Electronics, which reported a record quarter; however, the strong results were overshadowed by concerns about whether the robust pace of spending on components needed to build out AI infrastructure can continue at the same rate. Outside of technology, defensive sectors such as health care, consumer staples, and utilities fared better, with each gaining more than 0.9%. The energy sector also outperformed, benefiting from a near 5% rise in oil prices as geopolitical tensions between the U.S. and Iran resurfaced following a military flare-up in the Strait of Hormuz. Higher oil prices also flowed through to Treasury yields, with the 10-year yield climbing to 4.55% on the day and the 2-year yield rising to 4.18%.
   
• Second-quarter earnings season on the horizon – After a strong first half of 2026, investor attention will shift to second-quarter earnings season, which begins next week with several large U.S. financial institutions scheduled to report results. Expectations are for the robust profit growth seen in the first quarter to continue, with consensus estimates calling for S&P 500 earnings growth of nearly 22% year-over-year in the second quarter. At the sector level, information technology and energy are expected to drive much of the growth. Technology-sector earnings are projected to increase by more than 60%, supported by continued investment in AI infrastructure and related technologies. Meanwhile, energy-sector profits are expected to more than double from a year ago, benefiting from higher oil prices during the second quarter. For the full year, S&P 500 earnings are forecast to grow 24% year-over-year. If realized, this would mark the strongest annual profit growth since 2014, excluding the post-pandemic recovery period. We continue to believe the economic backdrop remains supportive for equities, underpinned by stable labor-market conditions and improving manufacturing activity. These factors should support healthy earnings growth in the quarters ahead and provide a favorable environment for equity markets, in our view.
   
• Midyear performance check-in – Global equity markets have started 2026 on a strong footing, with the S&P 500 gaining nearly 11%, including dividends, through yesterday's close. These healthy year-to-date returns have come despite an oil price shock and heightened geopolitical uncertainty during the second quarter, as strong corporate earnings growth and resilient economic activity have continued to support investor sentiment. Gains have also been broad-based beyond U.S. large-cap stocks. U.S. mid- and small-cap equities have outperformed, with the Russell Midcap Index up more than 15% and the Russell 2000 rising over 20% through yesterday's close. International markets have also delivered solid returns, with developed-market equities advancing more than 11% and emerging-market stocks rallying 24%, with performance in emerging markets supported by technology-heavy regions such as Taiwan and South Korea, which have benefited from robust AI-related spending trends. Given resilient economic activity and strong corporate earnings growth, we believe the backdrop for equities remains favorable. In our opportunistic asset allocation guidance, we recommend investors maintain an overweight allocation to equities relative to bonds, with a preference for U.S. large- and mid-cap stocks as well as emerging-market equities.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}