Market Updates

Source: Morningstar

Away from technology sector, oil prices increased by more than 20% in July, pushed higher by increased hostilities in the Middle East, which helped boost Energy sector stocks by 12%.

In sum, I concur with sentiment shared recently in a note by Jeremy Siegel, Emeritus Professor of Finance at Wharton and Senior Economist at WisdomTree: “The recent rotation away from the market’s most speculative leadership, while uncomfortable for some investors, strengthens rather than weakens the foundation of this bull market.”

Another way of framing this: prices for some technology stocks had come too far, too fast. The downward adjustment in their share prices in July, without a broad-based stock sell-off, is a healthy sign for the market as a whole.

Here are results for July and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Note: YTD 2026 as of July 31; Source: Morningstar

-RK

To my gridiron-wired mind, aspects of the “other football” are curious and bemusing.

For example:

• The clock counts up, not down, and keeps running during stoppages, resulting in time mysteriously tacked on at the end of the game
• Ties are allowed, considered normal – and often celebrated
• Flopping appears to be a legitimate tactic
• Offside: a player can be offside without touching the ball: simply interfering with an opponent’s ability to play – blocking their line of sight, for example – while in an offside position can be deemed a violation
• Cards: penalty cards accumulate across games: get two yellow cards in separate matches and a player can be suspended for the next match
• Advantage Rule: a referee can see a clear foul happen and simply not blow the whistle, waving play on because the fouled team already has the ball in a good position
• Substituted players can’t return: once you’re subbed off, you’re done for the match

Fortunately, World Cup games include a break that allows for reflection, discussion with more soccer-savvy acquaintances, and, if necessary, online search to figure out what transpired during the past 45 minutes of play.

Thank goodness for halftime.

Since we’ve reached the halfway point of the calendar year, it’s appropriate to reflect on some of the key developments in the financial markets so far in 2026:

• AI: Enthusiasm for Artificial Intelligence (AI) and the ecosystem that supports its development has been a driving force behind demand for technology stocks
• Earnings: Strong first-quarter earnings reports from large US companies, along with upward revisions to earnings forecasts, have also helped to buoy stocks
• War: US-Iran conflict caused severe dislocation in the oil trade, but the geopolitical shock was short-lived for US investors
• Inflation: It has remained sticker than hoped – well above the Federal Reserve’s 2% target – keeping bond yields elevated
• The Fed: Leadership change at the Federal Reserve has shifted the interest rate policy outlook – new Fed Chair Kevin Warsh has signaled a firm commitment to bringing inflation back to 2%, raising the odds of Fed rate hikes later in the year
• SpaceX: The company’s Initial Public Offering (IPO) created a major market event – it was the biggest IPO in history. The rocket-satellite-AI company became the sixth largest firm globally and it demonstrated investor interest for new, tech focused companies.
• Stock market leadership is broadening beyond technology: after years of tech stock dominance, industrials, financial institutions, healthcare, and small-company stocks began participating more meaningfully in June, a sign often associated with a healthier bull market.

The phenomenon mentioned in the last bullet point has been labelled “The Great Rotation” by some Wall Street commentators.

For more than a decade, a highly concentrated group of very large technology-oriented

companies has driven positive stock market performance.

However, the massive amounts of spending tech companies are now undertaking to actualize their AI-related plans is coming under greater scrutiny by investors.

If the pundits are correct in their characterization of this emerging “rotation” situation, investors have started pulling money out of the “expensive” tech stocks and redeploying that cash into less expensive areas of the market.

The result of a typical rotation is that money stays in the stock market, leadership changes, and positive overall stock market performance continues.

Thus far in 2026, stocks of all shapes and stripes are having another good year, as the middle column in the table below indicates.

But take a closer look at the June data in the left-hand column. US Industrial stocks top the list in performance of the Asset Class Returns table.

The Industrials index, made up mostly of “old economy stocks” – companies such as Caterpillar, Boeing, Union Pacific (railroads), and Eaton (electrical equipment) – outpaced the Technology index (which includes Nvidia, Broadcom, and Meta) by more than 10 percentage points last month.

Note: YTD 2026 as of 6/30/2026; Source: Morningstar

And two other non-tech sectors, Healthcare (+11.5%) and Financials (+9.7%) had even stronger performance in June than Industrials.

One month of old economy stocks outperforming new economy stocks fails to indicate a true “Great Rotation”.

But the shifting of preferences and performance displayed in June are noteworthy and may be a positive sign for the stock market as a whole – and for investors who maintain broadly diversified portfolios.

-RK

ASteve Sosnick, the chief market strategist at Interactive Brokers, referred to financial market activity in May as “the Everything Rally.” That’s not a bad way to frame what happened last month.

At the start of the month, investors were confronted with an unsigned Iran peace deal, oil above $100, inflation at a three-year high, a brand-new Federal Reserve chair, and a 30-year Treasury yield touching its highest level since 2007.

May closed with Technology sector posting another double-digit monthly gain. The S&P 500 index of large company US stocks rose 5.3% and closed at record highs on 11 days during the month. Foreign stocks gained more than 2.4%, and bond indices (despite large intra-month swings in yields) registered modest positive returns.

May was defined by three themes: the Iran war and its economic consequences; AI delivering broad-based, positive revenue trends in the technology sector; and a bond market that tested investor nerves.

The Iran War — Deal Always “Just Around the Corner”

The U.S.-Iran conflict is now in its fourth month. The Strait of Hormuz remained largely closed to commercial traffic, with only a handful of ships transiting daily versus 120 before the war.

Oil prices swung dramatically on diplomatic signals: Brent crude peaked near $126 in late April, fell toward $87 by month-end, then traded at various points in between as headlines shifted from hope to frustration and back again.

The month’s diplomatic arc was a recurring pattern: a constructive signal would arrive, sending oil sharply lower and stocks higher — only to be followed by a complication. By month-end, the memorandum of understanding between the US and Iran remained unsigned, and June opened with the same central question May had posed: when will a deal be signed?

The economic consequences of the conflict were visible throughout the month. Inflation hit 3.8% year-over-year — its highest since 2023 — driven heavily by energy. National average gas prices remained above $4.50 per gallon for most of the month.

And Goldman Sachs and Barclays both cautioned that even if the Strait fully reopened tomorrow, global oil inventories are so depleted that prices likely would normalize only gradually, not immediately.

Artificial Intelligence Delivers Positive Revenue Trends

April validated that AI is driving positive financial results for chip makers. May confirmed that AI demand is broadening into other areas of the technology ecosystem.

Some examples of how AI-driven demand is benefiting tech companies:

• Dell Technologies, which many folks associate with personal computers, reported AI server revenue up 757% year-over-year, a record $51.3 billion AI order backlog, and raised its full-year revenue forecast by roughly $27 billion.
• Cisco, another “old-line” technology-focused company, known for its networking gear that supports internet activity, raised its full-year AI order guidance to $9 billion — nearly double what it had guided just one quarter earlier.
• Nvidia, the new tech standard bearer that designs chips, and also hardware networks to power data centers as well as specialized software, reported $81.6 billion in quarterly revenue — up 85% year-over-year — and guided its next quarter to $91 billion.
• Cerebras Systems, which delivers supercomputer systems and cloud-based services, listed its shares through the largest tech initial public offering (IPO) since Uber went public in 2019, saw its shares surge 68% on the first day of trading.

The broader AI narrative for the month was captured well by one market analyst: “We started with chips and memory, but it’s really now about the broad AI infrastructure stack.”

And more AI-related activity is in store for investors in the months ahead, with SpaceX, Anthropic (maker of Claude) and OpenAI (maker of ChatGPT) all expecting to list their shares through IPOs and being trading on stock market exchanges later this year.

The Bond Market’s Warning

Not everything pointed straight up in May.

The bond market delivered a warning mid-month that temporarily interrupted the equity rally. The 30-year Treasury yield approached 5.2% in mid-May – its highest level since 2007, before the financial crisis – and the 10-year Treasury yield approached 4.7% (though bond yields did decline in the back half of May).

The main driver of higher yields was the Iran war’s inflationary impact on energy prices globally. The practical consequence for US households: 30-year fixed mortgage rates climbed back to 6.68%, putting further pressure on an already-stalled housing market.

Adding to the complexity, Kevin Warsh took over as Federal Reserve Chair on May 15, inheriting a divided institution with inflation running well above its 2% target.

The probability of a Fed rate hike in 2026, which was essentially zero a month ago, climbed as high as 45% during the month. Warsh’s first formal interest rate policy decision comes June 16.

Despite the swings in yields, benchmark US bond indices delivered positive returns in May. High quality bonds returned 0.3% for the month, and low quality bonds rose 0.5%.

As June begins, the questions that defined May remain open. The Iran deal is unsigned. Inflation remains elevated. The new Fed chair faces his first policy decision with rate-hike odds that would have seemed unthinkable a few months ago.

And yet the stock market enters June at all-time highs, with US Large Company Stocks up 11.2% for the year and Foreign Stocks up 9.1%. Whether the optimism that has driven the fourth consecutive year of stock market gains (so far) proves durable is the central question for the months ahead.

Here are results for May and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Note: YTD 2026 as of 5/31/2026; Source: Morningstar

-RK

April proved to be an exceptionally strong month for the stock market.

The month opened against the backdrop of an active shooting war, a nearly closed Strait of Hormuz, record oil prices, and a consumer confidence reading at an all-time low. Despite these concerns, stocks powered forward setting new all-time highs.

April was defined by three themes: diplomacy; an earnings season that delivered; and artificial intelligence producing revenue results for big technology companies.

The first theme was diplomacy — messy, uncertain, but seeming to trend in the right direction, from a financial markets standpoint.

April’s arc ran from President Trump threatening to knock out “every power plant and every bridge” in Iran, to a Pakistan-brokered ceasefire, to Iran briefly opening the Strait and then closing it again, to a revised Iranian proposal arriving through mediators on the final day of the month.

None of it was clean, and no permanent deal was reached. But markets are forward-looking, and as each week passed, the probability of catastrophic escalation fell while the probability of an eventual resolution rose. That directional shift — even without a final outcome — was enough to send stocks marching to new all-time highs.

The second theme was an earnings season that delivered, broadly and convincingly.

By month’s end, roughly 87% of S&P 500 companies that reported had beaten Wall Street analysts’ earnings estimates, with first-quarter profit growth tracking above 13% year-over-year.

A few of the standouts:

• Intel posted the largest earnings surprise — as a percentage — ever recorded for a major index component, sending the stock up 23% in a single session
• Caterpillar stock jumped 10% on a blowout quarter and raised full-year guidance
• Apple closed the season with record iPhone and Services revenue, announcing a $100 billion stock buyback, and Q3 guidance more than double what analysts had expected

The message from corporate America was consistent and clear: revenue and profits are generally on an upward trend and business is resilient.

The third theme was artificial intelligence — not as a concept, but as a revenue reality.

Several of the largest technology companies in the world showed impressive financial results related to AI infrastructure: Google Cloud grew 63% year-over-year, Microsoft’s Azure accelerated to 40% growth, and Amazon Web Services posted its fastest growth rate in 15 quarters. These were not promises about future potential — they were current-quarter revenue numbers from businesses already running at tens of billions of dollars in annual revenue.

Here are results for April and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Note: YTD 2026 as of 4/30/2026; Source: Morningstar

The war in Iran that began in late February continued throughout March. This put downward pressure on stock and bond prices, as investors worried about how long hostilities would last.

The main concern in March was the inflationary impact of significantly higher oil prices.

The price of oil rose between 50 – 65% in March (depending upon which benchmark oil price is referenced). Many Americans are now paying $4 per gallon of gas.

If the war shows no signs of letting up soon, investors’ concerns will shift to the broader impact on the economy, the likelihood of slower growth, the impending hit to company profits, and the possibility of recession.

We are not at an economic crossroads yet.

The US economy has proven resilient in the face of stress in the energy markets in the recent past.

For example, there was no recession in 2022 when oil prices spiked after war broke out in Ukraine. It’s reasonable to expect that this also will be the case in 2026.

Currently, most forecasters still expect the US economy to expand in 2026 (see the following article) and for company profits to rise.

But if hostilities extend well into the spring, US economic resiliency may be tested further, which would likely mean continued challenges for the financial markets.

The month of March closed with a positive tone with stocks rising 3% on the last day of the month as the US administration signaled its willingness to end the military campaign in Iran.

Investors need to keep in mind that the political and military situation is fluid and volatile; that stocks could decline significantly from today’s levels; and that developments in the Middle East will have a strong impact on the financial markets in the months ahead.

Here are results for March and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Note: YTD 2026 as of 3/31/2026; Source: Morningstar

The big market story for the year through February has been foreign stock market leadership. Foreign stocks almost matched their excellent January performance (4.9%) in February (4.6%). Currency was not a significant driver of dollar-based returns in either period.

In February, US large company stocks slipped, declining by 0.9%, compared to January’s positive return of 1.5%.

Within US equities, the rotation out of large company US technology stocks has shifted from January’s move into small company stocks to February’s preference for non-technology large company US stocks.

The bond markets continued to show positive results. Intermediate- and long-term Treasury bond yields declined over the course of February. The 10-Year Treasury bond yield actually fell below 4% for the first time in several months. The benchmark for US Investment Grade Bonds returned 1.6% in February.

Here are results for February and 2026 Year-to-Date, compared to longer-term annualized returns (10-Year Trailing):

Note: YTD 2026 as of 2/28/2026; Source: Morningstar

For the past three years, developments related to Artificial Intelligence (AI) have captivated investors. Stocks of large technology companies associated with AI have done very well, and the biggest of the bunch have generally performed best.

Recently, however, stock market sentiment has shifted from AI excitement to AI anxiety.

The source of this anxiety is twofold, stemming from:

1. Costs of Building AI: Developing AI infrastructure is costly; it will crimp the near-term profits of the companies building it; and it raises questions about profit margins for the AI infrastructure builders over the long term
2. Results from Deploying AI: Expanded AI usage may be disruptive for jobs, companies, and the stock market

The Costs of Building AI

The term “hyperscalers” is being used to refer to the tech company giants that are building and operating massive cloud-based computing infrastructure that supports the training and deployment of Artificial Intelligence models.

In the United States, the hyperscalers are Alphabet (Google), Amazon, Meta Platforms (Facebook), Microsoft, and Oracle. Collectively, these five companies account for 17% of the S&P 500 index of large company US stocks.

In 2023, the year after ChatGPT emerged on the scene, hyperscalers’ capital expenditures (money spent for acquiring long-lived assets) was about $150 billion. In 2026, it’s expected to be about $650 billion.

For comparison, US federal government defense spending in 2026 is expected to come in at about $900 billion. And, $600 billion is about the size of the economies of Singapore and Sweden (measured by Gross Domestic Product, or GDP).

The sums being spent on AI infrastructure are enormous, and the acceleration of the spending is breathtaking. So, investors are questioning whether the capital commitments will be worth it.

Profitability has been high for the hyperscalers in recent years, but large-scale AI investment is expected to pull down profit margins in the near term. Investors understandably do not like seeing margins decline, even for companies with long-term track records of operational success.

Perhaps AI investment will pay off and returns will start trending higher next year and beyond. Or, perhaps the anticipated demand for the compute capacity will be less than expected, and profit margins will be lower for longer.

Here’s how hyperscaler stock prices have performed over the past three years, and so far in 2026, compared to the broad market for US large company stocks as represented by the S&P 500:

Note: YTD 2026 as of 2/20/2026; Source: Morningstar

The hyperscaler stock price stall is telling us that investors are less sure that today’s spending will translate to outsized profits in the future.

The Results from Deploying AI

It really is far too early to know what the effects of AI availability and AI usage will be.

But predictions affected stock prices in various areas of the market in the first part of February. Here are some examples:

• AI developer Anthropic announced it was adding new legal tools to its Cowork assistant to help automate some legal drafting and research tasks. On February 3, shares of companies that provide legal tools and research databases dropped, as did other “software as a service” companies: Examples: Legalzoom dropped 20%; Thomson Reuters declined by 16%; Salesforce fell 7%.
• OpenAI (maker of ChatGPT) said it was adding an app for homeowner insurance quotes. Shares of insurance brokers proceeded to decline. Example: Marsh & McLennan dropped 8% on February 9.
• Financial custodian Altruist said its AI assistant could handle some tax-related tasks. Shares of brokers and financial custodians dropped. Example: Charles Schwab lost 7% on February 10.
• A Florida-based firm said it could use AI to improve efficiency in the trucking business. Shares of airlines, railroads, and trucking firms slid. Example: C.H. Robinson shares lost 15% on February 12.
• The CEO of Anthropic recently claimed that AI would wipe out half of all entry level white-collar jobs in the next one to five years, and Microsoft’s head of AI said that “most if not all” professional tasks would be automated within 18 months.

Some investors are inclined to shoot first before asking questions and seeing the results of AI deployment and utilization.

Other investors who hear about new technologies and see wild price swings in some stocks of established companies may be unsettled.

In his recent Weekly Commentary from February 17, professor and long-time market practitioner Jeremy Siegel offered these observations:

• Technological change will continue to disrupt industries, and some business models will be impaired
• Productivity growth is ultimately deflationary and wealth-enhancing
• We may even see the long-discussed four-day workweek become viable over time as output per hour accelerates; that is not a recessionary signal, that is a prosperity signal
• Anxiety is part of every technological transition
• Today’s data tell us the economy is stabilizing, inflation is receding, and real incomes are rising
• This is not a backdrop for derailing a bull market; it is a backdrop for its expansion

While it is worth having some perspective on what’s going on underneath the surface of a stock market, trying to pick winners and avoid losers as new technologies emerge is unadvisable.

A better, time-tested approach to investing is to maintain a diversified portfolio with exposure across sectors and markets, and to enjoy a rising tide that lifts many boats over the long term.

The financial markets got off to a satisfactory start for the first month of 2026. Here are results for January:

Source: Morningstar

Often from Christmas through year end, investors are treated to a “Santa Claus Rally”, where stock prices rise. But 2025 followed the atypical pattern from 2024: stock prices fell during the final days of the year.

The waning-days-of-2025 drop marks the 13th time the benchmark S&P 500 index fell by more than 1% over that span since 1952.

As catalogued in our Review last year at this time, a “Santa Slump” does not necessarily foreshadow poor returns for the year ahead.

Bespoke Investment Group found that, in the twelve months following a year-end decline of more than 1%, stocks tended to do better. Large company stocks’ median performance after Santa Slum years, in fact, has been a gain of about 12%.

For 2025 as a whole, it was another strong year for U.S. stocks. In 2025, the S&P 500 index of large-company stocks rose nearly 18% and hit 39 new all-time highs along the way. This follows annual returns of 25% in 2024 and 26% in 2023.

Once again, the technology sector was a major contributor to these more-than-satisfactory gains. Tech was the top-performing sector in the S&P 500 during 2025, gaining nearly 25%.

Furthermore, the seven largest tech companies (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), often referred to as the “Magnificent 7”, contributed about half of the S&P 500’s price return in 2025.

Outside of the US, stock returns were even more impressive. The MSCI EAFE (Europe, Australasia, and the Far East) index of foreign stocks rose by 31.6%.

One reason why foreign stock returns bested US stocks is that the US dollar fell by about 7.5% compared to other major foreign currencies. Dollar weakness boosts foreign stock returns, when those returns are measured in US dollars.

Even though bond returns lagged behind stock returns, bonds had a good year, too.

A key driver of the positive performance for bonds has been declining interest rates, which helped to push up bond prices. Over the course of 2025, 3-Month Treasury bill yields dropped by 0.7 percentage points, and 5-Year and 10-Year Treasury bond yields declined by 0.6 and 0.5 percentage points, respectively.

For 2025, high quality intermediate-term bonds, measured by the benchmark Bloomberg US Aggregate Bond Index, returned 7.2%. For short-term bond funds, where prices are much less influenced by changes in interest rates, results were less impressive, with returns landing in the 4-6% range.

Here’s a snapshot of US stock and bond performance in 2025; the 5-year average annual return for each asset class is included for comparison purposes.

Source: Moore Financial Advisors & Morningstar

-RK

November started out looking like a month not to remember, as the government shutdown continued, concerns mounted about the Federal Reserve backing away from interest rate reductions, technology stocks sank, and crypto prices cratered.

By mid-month asset price declines were mounting: US large company stocks were down by 4%; technology stocks had fallen by 9%; and Bitcoin had dropped by 23%.

However, the mood in the market became more positive as the month lengthened, perhaps helped by a holiday hiatus and the arrival of year-ahead forecasting season.

Wall Street research departments are delivering their best guesses for what might happen in the next twelve months. And many forecasters look for another year of double-digit returns for stocks in 2026.

By the time November drew to a close, many asset classes had posted modestly positive returns.

Here’s a snapshot of financial market performance for the month of November and Year-to-Date (YTD):

Source: Moore Financial Advisors & Morningstar

The stock market got fresh fuel during the last week of October in the form of positive earnings reports from large technology companies, which helped push stock indexes to a new all-time high.

Apple, Amazon, and Alphabet (Google) all posted revenues and profits that exceeded expectations and telegraphed solid outlooks for 2026. These three stocks combined make up 16% of the S&P 500 Index.

Thus far in 2025, the large company US stock index has closed at record levels on thirty six occasions – most recently on October 28.

The government shutdown, which persisted throughout the month and carried on into November, thus far seems to have had little impact on financial markets.

But the Federal Reserve’s decision to reduce interest rates has contributed to constructive market sentiment.

The Fed cut the Federal Funds Rate for the second time in 2025 on October 29, bringing the official target for short-term interest rates to a range of 3.75% – 4.0%.

Lower interest rates are generally viewed as supportive for stocks because when the Fed cuts rates, it often becomes less expensive for many companies to borrow money.

Cheaper loans can lead to increased investment in growth-related activities (like research, hiring, and expansion) which can boost company earnings in the future.

The Fed committee that determines interest rate policy meets again for the final time in 2025 next month.

Expectations are for another rate cut on December 10, which would bring the short-term interest rate target below 4% for the first time since 2022.

October was a positive month across the board for broad-based stock and bond market indexes, as the chart below shows.

Source: Moore Financial Advisors & Morningstar

And with ten months now behind us, 2025 is likely to be another strong year for financial market returns.

In fact, the last extended period of tough sledding for stocks happened more than three years ago. That bear market ended in October 2022, and stock returns have been stellar since then.

After three years of very strong returns, it’s natural to wonder: have stocks come too far, too fast? And, if so, is it time to sell risky stocks and move to the safety of cash before the tide turns and the next bear market arrives?

This type of inquiry centers around the idea of market timing: making buy or sell decisions based on predictions of future market movements.

If you can accurately predict what will happen tomorrow, making big moves with your money to “lock in gains” and “avoid losses” today is logical.

However, we’re unaware of anyone who can accurately and consistently predict what will happen in financial markets and to stock prices, especially over the near term.

Rather than trying to guess what will happen in financial markets tomorrow, or next week, or next month, taking a long-term approach to investing is a far better approach.

Building expectations for financial market returns, establishing asset allocation targets that support your financial plan, and ensuring that your portfolio reflects those targets are important elements of successful investing over the long term.

Attempting to “get ahead of the market” introduces the possibility of failing to capture future gains by not having enough stock market exposure, and falling short of the long-term returns required by your financial plan.

The well-regarded investor and author Peter Lynch has said: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections.”

These words of investment wisdom are worth paying attention to, particularly during extended periods of strong stock market returns.

-RK