Client Newsletter Q2 2026
Dear Friends,
The second quarter was a strong one for the stock market. It didn't just recover from a rocky first quarter. It blew right past it, posting gains that took a lot of people by surprise.
Once again, AI gets much of the credit, but the cast of characters has grown. A couple of years ago, the "Magnificent 7" drove most of the market's gains. That group has now grown to ten. These companies, many of them building the chips, networks, and power systems that AI runs on, accounted for roughly 80% of the S&P 500's gains this quarter. The flip side is that many other sectors have lagged in the short term, simply because so much money and attention is chasing the same small group of winners.
This split reminds us of Charles Dickens: "It was the best of times; it was the worst of times." We seem to be living in a tale of two economies. Turn on the news and you'll hear plenty to worry about: unrest in the Middle East, higher gas prices, the rising cost of living, questions about AI and jobs, and whether the economy is slowing down. These are real concerns, and interest rates in particular are something we watch closely, since they touch everything from mortgages to business borrowing.
Yet businesses are telling a different story. Many companies kept reporting solid earnings and healthy cash flow. Well-run businesses don't wait for perfect conditions. They adapt quickly, control costs, and keep finding ways to compete. Interestingly, even with all their worries, many consumers remain optimistic about the stock market over the next year. We’re living in multiple parallels: worry about the economy, optimism about the market.
Elsewhere, we are seeing a frenzy in a particular IPO, SpaceX. This reminds us of not long ago, when crypto was capturing everyone's imagination. Now it's the next exciting idea. Our approach doesn't change with the trend: we don't buy a company just because it's exciting. We wait until it’s understood and results are proven.
Corporate profits remain the true foundation of stock values, and that is where we keep our focus, looking past the noise to the businesses behind the numbers.
Have a wonderful summer,
Investment Advisory services offered through Moonstone Asset Management, Inc. a registered investment adviser
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
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