Client Letter – July 2026

Q2-2026 Market Results

The second quarter of 2026 was a decent one for investors as most markets were up for the quarter. The S&P 500 was up 15.20% for the quarter, and International stocks were up slightly less at 9.80%. Emerging Markets were also up strongly at 18.12% for the quarter. Intermediate bonds were up slightly at 0.67%. Short Treasuries were up slightly at 0.37% for the quarter.

Portfolio Thoughts

Portfolios were mostly up in the second quarter. The S&P 500 and most other markets moved in a fairly steady rise over the course of the quarter. The only small pullback occurred in early June. Although Bonds were up slightly, we still feel the bond recovery has not begun to the extent we believe it will. Given that the Federal Reserve (Fed) held interest rates steady in June, we did not expect significant bond changes. Tactical and Strategic portfolios were up nicely for the quarter with Strategic slightly ahead of Tactical. The AAA momentum portfolios were by far the biggest winner with very strong performance. Unlike last quarter, Capital Preservation portfolios were up nicely.

Q2-2026 Notes

Last quarter, in our letter, we discussed how the U.S. sustained another self-inflicted wound in the markets due to the start of the war with Iran. Now, as of the middle of June, it seems the war has entered a ceasefire, and markets, including oil, have responded positively. Although the ceasefire seems a bit sketchy, markets are generally looking at what appears to be a reluctant President Trump to restart military action. President Trump has seen much criticism of his ceasefire deal with Iran as giving too much away and not getting enough from a war-ravaged Iran. More on this below.

Fed Held Interest Rates

As stated above, the Fed held interest rates steady in June. We agree with this decision as it is hard to know what direction the economy will take now that the Iran war is over…if, in fact, it is over. This was the first meeting with the new Fed Chairman, Kevin Warsh. We believe Mr. Warsh has ideas for a significant revamp of the Fed and its operations, but those changes will take time, and Mr. Warsh is smart enough to navigate the Fed without causing undue concern. Not to mention that the previous Fed chairman, Jerome Powell, remains on the Fed Board and will be a significant obstacle to whatever changes Kevin Warsh wants to make. 

New Task Forces

Mr. Warsh has created five new task forces to review factors affecting the Fed’s monetary policymaking. We don’t expect the results of the task forces to come anytime soon, but any potential changes would require support from the remainder of the Fed leadership to implement as policy. This will give Mr. Warsh time to build his relationships with other Fed members and try to steer them towards accepting changes as potentially outlined by task force recommendations. Time will tell how that goes.

Supreme Court Decisions

On another note, we feel it might be appropriate to mention the recent round of Supreme Court decisions handed down in the 2025-2026 term, which ended on June 30, 2026. These decisions were significant enough for us to mention here in our letter.

Birthright Citizenship

The biggest one was likely the decision to keep Birthright Citizenship in place. President Trump was vehemently against continuing this practice, but the Supreme Court ruled 6-3 to keep it in place. This means that any child born in the United States, regardless of the citizenship status of their parents, is a U.S. citizen. This right is enshrined in the 14th Amendment to the U.S. Constitution, ratified in 1868. Arguments were made that the 14^th Amendment was originally designed more to address issues with slaves and does not apply to undocumented immigrants coming to the U.S., but clearly the court rejected this logic. 

Transgender Athletes

The other major decision concerned transgender athletes competing in girls’ sports. Another 6-3 decision, which will allow states to ban transgender women from competing in girls’ sports. This decision was very much in line with President Trump’s view. The arguments here were fairly clear, and for much of the country’s population, this is the ruling they wanted. It will be interesting to see which states choose not to implement the ban and what the reaction of biological girls and their parents will be. Our takeaway from these decisions is that although the Supreme Court is split with 6 conservative-leaning judges and 3 liberal leaning judges, it is not fair to assume that the conservative judges will automatically side with President Trump. In this case, he won one verdict and lost the other. We feel the Supreme Court has illustrated its fairness in making judgments using legal logic and not just underlying ideology.

Global Outlook

We don’t think there is any way for us to discuss global activity without coming back around to the war with Iran and the shaky ceasefire now in place. We mentioned earlier that President Trump is taking a lot of heat for the lack of specificity in his ceasefire-related Memorandum of Understanding (MOU) language. 

Memorandum of Understanding

The MOU is designed to be a temporary ceasefire along with a 60-day negotiating period for the U.S. and Iran to come to terms with other issues such as their pursuit of nuclear weapons. We fully understand these sentiments, as the language of the ceasefire MOU is not very specific and leaves ample room for interpretation, which Iran seems to be taking full advantage of. 

Strait of Hormuz

One good example of this interpretation is the Strait of Hormuz. In the MOU, the language states that the “Republic of Iran will make arrangements using its best efforts for the safe passage of commercial vessels with no charge”. However, since the implementation of the MOU, Iran has made clear that vessels must use its approved route through the Strait to avoid a “forceful response”. This is while Iran is allegedly working with Oman to implement a transit fee system to be put in place at the end of the 60-day MOU. This is in direct conflict with the stated U.S. intentions for fee-free Strait transit as seen in other international waterways. 

Another good example again is in the Strait of Hormuz, where Iran attacked a Singapore-flagged cargo ship after the MOU had been signed. The U.S responded with military strikes focused on Iranian missile and drone storage along with coastal radar sites. The Iranian attack was in direct violation of the MOU agreements and illustrates that the IRGC is unwilling to give up all its leverage. However, we feel these negative sentiments are a bit premature.

Iran is Run by IRGC Leaders

Clearly, Iran is being run by the leaders of the Iranian Revolutionary Guard Corps (IRGC), which is a very hardline group that will find it difficult to give in on many of the United States demands. But we feel that President Trump will likely not accept a bad deal with Iran, and he will return to military action if the IRGC does not respond in a way that works for him. He is giving diplomacy a chance, and we feel that is likely because, if there is another round of military action, it will be to take out significant infrastructure in Iran and set the country back decades beyond just military measures. 

We believe President Trump does not want to do this because although it will affect the Iranian leadership, it will also greatly affect Iranian citizens, who generally do not like the Iranian leadership regime and have precious little they can do to instigate regime change. Devastating the Iranian infrastructure will bring a tremendous burden to the entire country, but also to the Iranian citizens, and we believe President Trump wants to avoid that. 

We think this is a very fair and decent choice to give diplomacy a chance, but overall we are skeptical. From our view, it seems as if Iran is biding its time and following the ceasefire guidelines only when it aligns with its intentions. Thus, the ceasefire becomes a part-time solution for Iran, and we feel a restart of U.S. military action seems inevitable. We hope we are wrong, but this is what we believe.

As always, we will watch and research the global economy and make investment choices to the best of our ability for each and every client portfolio. If you have questions about your portfolio, our views expressed in this letter, or anything else financial, please do not hesitate to call.

Best Regards,