Q2 2026 Newsletter

The ISM Non-Manufacturing Index shows that the services side of the economy is still resilient with the index posting 54.0 in June, matching the consensus. There have been some very strong readouts this year including the February number of 56.1 which was the highest since July of 2022.  The ISM Manufacturing Index came in at 53.3 in June, with manufacturing continuing to show some signs of life, after being on life support for many years. 

Geopolitical Concerns Still Remain

The conflict with Iran is far from over, and oil prices have moved back up in the last week. We have learned some key facts like how much reserves China had built up before the conflict began. Chinese imports in the last few months fell to their lowest level since 2017. Gulf states have begun plowing billions into pipelines and other ports in order to diminish the importance of the Strait of Hormuz as a geological flashpoint. Modeling inflation in this type of on again off again scenario is very difficult. Inflation still remains elevated and is well north of the 2% target.  When and how this conflict resolves is important to the overall inflation picture, and if oil prices remain stubbornly high, they will certainly have an impact on voters in the midterm elections. 

A New Sheriff…(Fed Chairman) in Town

Kevin Warsh was confirmed as the new Chair of the Federal Reserve on May 13^th in the slimmest vote since the confirmation process was started back in 1977.  He presided over his first meeting on June 17^th, and we learned quickly that things might be a little different under his term.  One key agenda item he would like to reduce, if not eliminate, is Forward Guidance policy with began in 2003 under long running Fed Chair Alan Greenspan. Ben Bernake expanded upon this during the GFC in 2008-2009. Fed Governors go out of their way to communicate in the weeks and months leading up to fed meetings their intentions with regards to interest rate policies. The idea is for the Fed to have transparency, and this would avoid surprising investors and the markets.  In addition to that, Warsh has created five tasks forces to look into the following: 

1. Fed Communication policy (possibly fewer press conferences)
2. The Fed’s Balance Sheet, and evaluate if it should shrink, and if so how 
3. Evaluating the use and reliance on existing data sources
4. Evaluating the Fed’s inflation framework- possibly reassessing the Fed’s 2% target
5. Evaluating productivity and jobs in an era of major transformation

The market is pricing in one potential rate hike before the end of this year, and possibly two more rate hikes in 2027. This can change on a dime depending on the data and market conditions. 

Corporate Earnings Continue to Move Higher and Valuations Have Improved

Corporate America continues to do quite well as measured by the continued strength in earnings growth. S&P 500 earnings have grown from roughly $235 in 2024 to an estimate of $340 for 2026.  Coming into the year estimates were for $315 but have continued to be revised higher. Current estimates for 2027 are earnings of $400.  The AI hyperscalers continue to spend on AI, and the buildout includes chips and data centers. Despite poor stock performance from the Mag 7 their earnings continue to get revised higher as do the earnings for the remaining 493 S&P companies. Four of the five top contributors to earnings growth for the S&P 500 for Q2 2026 are not “Magnificent 7” companies: Micron Technology, Chevron, Exxon Mobil, and Broadcom. NVIDIA is the only “Magnificent 7” company that is also a top 5 contributor to earnings growth for Q2 2026. The 493 earnings are growing as the Mag 7 earnings are slowing, which goes to the point of the market rally broadening out. Additionally, the S&P 500 multiple has come down a bit from 22.0X to 20.4X.


Much of the bearish commentary today compares today’s AI gold rush to the tech bubble of the late 90’s.  The massive investment in AI is undoubtedly going to lead to winners and losers as it did in the late 90s, however the fundamentals today are far more supportive of multiples than they were in the 90’s. The chart below shows a stark difference between the 90’s and now.
 


Outlook, Risks, & Opportunities for the Next Few Months 

As we enter the second half of 2026, key themes will likely shape market performance:

Monetary Policy:  Coming into the year rate cuts were on the table, now one rate hike is priced in for later in the year. Tightening of monetary policy is a risk, especially if inflation rises as the conflict in Iran heats back up. Additionally, if Tariffs come back into the fray (Canada), that could also push up inflation. With a new Fed Chair at the helm, the markets will have to digest the potential changes at the Federal Reserve. Less transparency could create surprises when it comes to monetary policy.

Earnings Momentum: Corporate earnings have proven surprisingly resilient with numerous upward revisions. Upward revisions are also taking place outside of technology, which is a positive sign.  

Geopolitical Risks:  The impact from Geopolitical conflicts have so far been minimal in terms of the impact on the markets. If oil prices resume the upward climb, that could be a headwind for the stock market. 

Midterm elections- Generally a positive for the markets in the 12-month period post elections. Since World War II Equity markets on post midterms are up an average of 16%.  Additionally, the overhang and concerns around midterm years create more volatility and tend to be the years with the highest drawdowns, with intra year drawdowns in midterm years average greater than 17%. 

Our Perspective

Spending on AI infrastructure continues to drive economic activity, and the AI hyperscalers have pointed to spending close to $700 billion this year. These are massive figures.

Hyperscalers have been topping the debt markets in 2025, and that has continued into 2026. The surprise was Alphabet (Google parent) raising equity of close to $85 billion including a $10 billion investment from Berkshire Hathaway. To put it in perspective the last time Google raised equity was in April of 2006. 

We continue to reiterate the benefits of a diversified portfolio where dividends and dividend growth matter, earnings growth matter, and valuations matter. Also having assets with lower correlation can have a meaningful impact during volatility. Big tech companies such as Google and Microsoft have been buying back less of their stock, while committing the funds to AI capital expenditures. Google has not bought back one share of their own stock in 2026. In 2023 they bought back $61.5 billion, in 2024, they bought back $62.2 billion, and in 2025 they bought back 45.7 billion. Stock buybacks have helped propel a decent chunk of earnings growth as well as market appreciation over the last few years, so it is definitely something to keep an eye on. 

Headlines can cause anxiety and force an emotional response, but we continue to remain disciplined and focused on risk management. We often take advantage of drawdowns to add to positions in which we have conviction.

Key Takeaways for Investors: 

• Stay Invested: Focus on your specific financial plan and stick with the allocation that helps you achieve your long-term goals.
• Maintain a Diversified Portfolio: This theme is alive and well, and after many wrote this off, 2025 was a terrific year for diversified portfolios, and 2026 is proving this all over again.
• Focus on Quality and Dividends: In times of heightened uncertainty, companies with strong fundamentals tend to outperform. We tend to focus on companies and sectors that exhibit healthy balance sheets, lower leverage, and a competitive moat with pricing power.
• Maintain Perspective:  Major Geopolitical conflicts can have short term impacts on the markets, but rarely is the impact long lived. Markets are resilient, and you have to focus on fundamentals and not headlines. 

As always, do not hesitate to reach out anytime to discuss your portfolio and your particular financial situation. We are here to help you navigate these markets and stay focused on your long-term objectives. Stay safe, stay healthy, and we hope you enjoy the rest of your summer!

Gary Russell, Founder
Howard Morin, Founder
JJ Feldman, Head of Wealth Management
And Your Helium Advisors Team

Sources: FactSet, YCharts, FRED, CNBC, U.S. Bureau of Labor Statistics, Federal Reserve, Bloomberg, Goldman Sachs Asset Management, Dimensional Fund Advisors, MSCI, Russell Indexes, S&P Dow Jones Indices, CME Group, IMF World Economic Outlook, Bloomberg
Past performance is no guarantee of future results. Index returns do not reflect fees, expenses, or taxes. Indices are unmanaged and cannot be invested in directly. This newsletter is for informational purposes only and should not be construed as investment advice. Please consult with your financial advisor regarding your specific situation.
 

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