| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
U.S. equities rebounded sharply in Q2 2026, with the S&P 500 gaining 15.2% driven by AI-related strength in Information Technology, which surged 31.8%. Growth stocks significantly outperformed value, and small-cap equities outpaced large caps, pointing to modest market broadening. Emerging markets led global performance with a 24.1% gain, supported by AI infrastructure demand in Taiwan and South Korea and commodity demand in Latin America. The macroeconomic backdrop reflected reaccelerated inflation, with headline CPI rising to 4.2% driven by earlier energy shocks from the Strait of Hormuz conflict, though oil prices have since moderated. The Fed held rates at restrictive levels amid inflation concerns. Fixed income markets experienced rising yields, with the 5-Year Treasury moving from 3.94% to 4.23%, though corporate credit showed resilience with investment-grade spreads tightening to near multi-year lows. Municipal bonds stabilized after Q1 volatility, supported by strong demand and attractive after-tax yields. Looking ahead, market direction will remain sensitive to inflation, Middle East developments, and the durability of AI-driven earnings growth.
The second quarter of 2026 marked a sharp rebound in U.S. equities driven by AI-related strength in technology, with the S&P 500 gaining 15.2% and Information Technology surging 31.8%, while emerging markets materially outperformed developed markets on AI infrastructure buildout and commodity demand.
Market direction will likely remain sensitive to the path of inflation, developments in the Middle East, and the durability of earnings growth, particularly in AI-driven sectors. It remains prudent for investors to monitor evolving economic and geopolitical conditions and maintain a balanced, long-term approach. The importance of maintaining diversified international exposure is reinforced, as regional and sector performance will likely continue to vary meaningfully. In the fixed income market, a continued focus on credit quality, selective sector exposure, and thoughtful duration positioning remains crucial.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 15 2026 | 2026 Q2 | - | AI, credit, emerging markets, energy, Geopolitical, inflation, rates, semiconductors | - | Q2 2026 delivered a sharp equity rebound led by AI-driven technology strength, with the S&P 500 up 15.2% and emerging markets surging 24.1%. Inflation reaccelerated to 4.2% on energy shocks from Middle East conflict, prompting the Fed to hold rates restrictive. Corporate credit remained resilient despite rising Treasury yields. Market outlook hinges on inflation trajectory, geopolitical stability, and AI earnings durability. |
| Mar 31 2026 | 2026 Q1 | - | energy, fixed income, geopolitics, inflation, international, Iran, Municipal, oil | - | Q1 2026 markets were upended by Iran conflict escalation in March, disrupting global energy supplies and sparking stagflation fears. The S&P 500 fell 4.3% as geopolitical risks dominated, reversing earlier optimism. Energy prices surged while defensive sectors outperformed. With policy tools constrained and risks elevated since the pandemic, prudent positioning is essential. |
| Jan 9 2026 | 2025 Q4 | - | Dollar, equities, Fed, infrastructure, international, Municipal, rates, Yields | - | Strong 2025 market performance masks underlying K-shaped economic divergence between income segments. International equities dramatically outperformed on dollar weakness from policy uncertainty. Municipal issuance hit records on infrastructure needs. Fed leadership change expected with more dovish successor. While strategists remain bullish for 2026, sustainability concerns exist given consumer spending concentration among top earners. |
| Oct 9 2025 | 2025 Q3 | - | AI, Fed, fixed income, rates, tariffs, technology, Valuations | MSFT US | Strong Q3 performance driven by AI momentum and Fed rate cuts masks concerning fundamentals. Market concentration and valuations have reached dangerous levels not seen since 2000, while persistent fiscal deficits and Fed dual mandate challenges create systemic risks. Despite solid corporate earnings and consumer spending, prudent risk management is essential given current market conditions. |
| Jun 30 2025 | 2025 Q2 | - | AI, Dollar, Federal Reserve, geopolitics, inflation, tariffs, technology, Trade Policy | - | Q2 2025 markets surged 10.94% after overcoming early tariff volatility, driven by AI enthusiasm and trade policy stabilization. Dollar weakness boosted international equities while fixed income stabilized. Key concerns include elevated valuations, persistent inflation, and fiscal risks from higher rates. Strong performance masks underlying macro uncertainties requiring continued vigilance. |
| Mar 31 2025 | 2025 Q1 | - | Bonds, fixed income, international, Multi-Asset, Municipal, uncertainty, volatility | - | Davidson Investment Advisors maintains disciplined multi-asset positioning amid Q1 volatility, with equities down 4% as AI unwound but bonds providing 2.4% ballast. The firm strategically emphasizes dividend growth and resilient balance sheets while finding opportunities in BBB bonds and international markets. Policy uncertainty creates near-term noise but reinforces their long-term opportunity-focused investment approach. |
| Dec 31 2024 | 2024 Q4 | - | AI, credit, Dollar, fixed income, international, Municipal, rates, technology | - | U.S. markets delivered exceptional 25% gains driven by AI-fueled Technology leadership, but face headwinds from rising long-term rates, dollar strength pressuring international markets, and stretched valuations. The Fed's rate cuts diverged from rising Treasury yields, reflecting economic resilience but creating bond market volatility. Geopolitical uncertainty and consumer credit strain add risks entering 2025. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIAI drove strong performance in Information Technology, which surged 31.8% in Q2. Continued investment in AI infrastructure supported domestic equities and East Asian technology markets, particularly Taiwan and South Korea. AI spending on data centers, electricity infrastructure, and semiconductors is now viewed as a near-term source of inflation rather than a long-term deflationary force. |
Data Centers Semiconductors Infrastructure Technology Taiwan |
InflationInflation re-emerged as the dominant market theme, with headline CPI rising to 4.2% year-over-year driven by higher energy prices. The inflation outlook remains uncertain despite recent oil price moderation. AI-related spending is now increasingly discussed as a near-term source of inflation, and the Fed has held policy rates at restrictive levels in response. |
CPI Energy Fed Rates Oil | |
EnergyEnergy sector declined 13.5% as oil prices retraced a portion of their first quarter spike. Crude oil prices spiked sharply due to the closure and blockade of the Strait of Hormuz, but have since moderated as the ceasefire appears to be holding. Higher energy costs weighed on consumer purchasing power and business confidence, particularly in Europe. |
Oil Strait of Hormuz Middle East Geopolitical Supply Chain | |
RatesThe 5-Year U.S. Treasury yield increased from 3.94% to 4.23% during the quarter. Markets that anticipated additional rate cuts began pricing in possible future hikes. The Fed held policy rates at restrictive levels amid reaccelerated inflation. Higher starting yields create a larger cushion against adverse moves while enhancing long-term return potential. |
Fed Treasury Inflation Monetary Policy Yields | |
Emerging MarketsThe MSCI Emerging Markets Index led global equity performance, gaining 24.1% for the quarter, materially outperforming both U.S. and Developed Market equities. The ongoing buildout of AI infrastructure supported East Asian technology markets, particularly Taiwan and South Korea. Commodity-producing markets in Latin America also benefited from demand for oil and critical minerals. |
MSCI Taiwan South Korea Latin America Technology | |
SemiconductorsEast Asian technology markets, particularly Taiwan and South Korea, were supported by their central role in global semiconductor and memory chip supply chains. The ongoing buildout of AI infrastructure drove demand for semiconductors. Investment-grade corporations issued debt at a historic pace, with roughly 18% from AI-related borrowers. |
Taiwan South Korea Memory AI Supply Chain | |
CreditCorporate credit markets showed notable resilience despite heightened volatility. Investment-grade spreads tightened from 1.12% to 1.00% over comparable Treasuries, near multi-year lows. This occurred despite record new issuance, as strong investor demand absorbed the supply easily, underscoring the continued appeal of high-quality corporate credit. |
Corporate Spreads Investment Grade Issuance Demand | |
| 2026 Q1 |
OilAttacks on Iran in early March significantly impacted markets amid talk of stagflation and worldwide crisis in energy markets. The Strait of Hormuz closure and Iranian attacks on energy infrastructure in the Persian Gulf have disrupted global oil flows, with twenty percent of the world's oil typically transiting the Strait daily. Higher energy prices impact consumer spending, manufacturing, and transportation globally. |
Energy Geopolitics Inflation Supply Chain Iran |
LNGThe market for Liquified Natural Gas has been significantly affected as exports from Qatar, the world's number two producer, have essentially ground to a halt as the country declared force majeure relating to existing contracts for delivery. This disruption affects global energy markets and supply chains. |
Natural Gas Qatar Energy Supply Chain Exports | |
AIQuestions remain as to the effects of artificial intelligence on entire industries such as software and the labor market, particularly among new college graduates. Optimism around productivity gains from artificial intelligence and technological investment continues to build, but those potential benefits must be weighed against inflationary pressure of higher energy costs. |
Technology Productivity Labor Software Innovation | |
Private CreditUncertainty in the private credit markets are causing concern. Isolated instances of gating and redemption limitations reminded investors that liquidity in private markets can disappear precisely when it is most needed. These developments sparked renewed debate about valuation transparency, risk premiums, and the role private credit should play alongside publicly traded bonds. |
Credit Liquidity Valuation Risk Markets | |
GeopoliticsGeopolitics was the dominant macro theme of the quarter, with escalating tensions and the effective closure of the Strait of Hormuz raising the specter of a sustained oil supply shock. Events surrounding Iran proved most consequential for global markets, driving energy prices higher and reviving inflation concerns. |
Iran Energy Risk Markets Conflict | |
| 2025 Q4 |
RatesFederal Reserve lowered rates by 25 basis points in December sensing labor market weakness. Trump's disapproval of Powell and preference for lower rates creates uncertainty about future Fed leadership and policy direction. Short-term rates controlled by Fed while long-term rates set by market participants through trading activity. |
Federal Reserve Interest Rates Monetary Policy Fed Chair FOMC |
Credit StressInvestment grade corporate bond issuance expected to reach $1.81 trillion in 2026, a 10% increase from 2025. Given already tight spreads, this elevated issuance volume makes potential spread widening plausible in the coming year as supply may exceed investor demand. |
Corporate Bonds Credit Spreads Issuance Investment Grade Primary Market | |
Infrastructure SpendingMunicipal new issuance reached record levels over $567 billion in 2025, surpassing 2024's $494 billion. Higher construction costs drove state and local governments to continue borrowing, with need for additional infrastructure and energy expected to continue growth into 2026. |
Municipal Bonds Construction State Government Local Government Public Works | |
DollarDollar dropped significantly during first half of 2025 due to market uncertainty from U.S. trade policy changes, budget deficit concerns, Federal debt levels, and Fed independence questions. This decline provided major boost to international equity performance and earnings expectations. |
Currency Exchange Rates Trade Policy Budget Deficit International | |
| 2025 Q3 |
AIArtificial Intelligence companies continue to rally on strong momentum and guidance regarding spending and demand. The excitement of AI was a main driver of stock market performance in Q3 2025, with Information Technology and Communication Services stocks leading the market. |
Technology Growth Momentum Semiconductors Software |
RatesThe Federal Reserve commenced its first rate cut, providing significant tailwinds to markets. The expectation and commencement of Fed cuts in short-term interest rates was a significant driver, though the Fed faces challenges with its dual mandate given persistent inflation above the 2% target. |
Federal Reserve Monetary Policy Interest Rates Inflation Fixed Income | |
Trade PolicyThe tariff picture is slowly coming into focus with preliminary agreements announced during the quarter. The effective tariff rate increased from 2.31% in November 2024 to 9.75% by July 2025, though the negative economic effects have been more gradual than expected. |
Tariffs International Trade Economic Policy Global Growth Emerging Markets | |
| 2025 Q2 |
Trade PolicyThe Trump administration's Liberation Day tariff announcement created significant market volatility in Q2, with reciprocal tariffs being broader and more aggressive than expected. A 90-day pause was implemented to allow for bilateral negotiations, with tariff levels ultimately settling at roughly twice their pre-Liberation Day levels. The tariff uncertainty contributed to dollar weakness and inflation concerns. |
Tariffs Trade War Reciprocal Negotiations Dollar |
DollarThe U.S. dollar experienced significant weakness, falling roughly 8% since peaking before Trump's inauguration and posting its weakest first half performance in over 40 years. This weakness was attributed to reduced foreign appetite for U.S. assets, particularly Treasuries, and the inflationary impact of tariffs offsetting traditional dollar strength from trade policies. |
Currency Depreciation Foreign Outflows Treasuries Weakness | |
InflationInflation remained a key market focus with core CPI holding around 2.8% year-over-year in May, though the 3-month annualized core rate slowed to its lowest level since 2021. Tariff uncertainty and dollar weakness created upward pressure on inflation expectations, complicating the Federal Reserve's policy decisions and keeping rates unchanged. |
CPI Core Expectations Pricing Pressures | |
AIRenewed enthusiasm for artificial intelligence drove strong performance in Technology and Communication Services sectors during Q2. AI-related themes contributed to the market's concentration among mega-cap companies and supported the continued outperformance of growth over value strategies. |
Technology Communication Services Mega-cap Growth | |
| 2025 Q1 |
DividendsThe firm has been moving to more exposure to dividend growth stocks as part of their disciplined approach. Defensive sectors such as Health Care, Utilities and Consumer Staples finished higher as investors became more risk-averse and sought safety in dividends. |
Dividend Growth Defensive Income Safety |
Trade PolicyThe main topic in markets has gone from interest rates to tariffs with the new Trump administration the focal point of news flow. Trade wars, deportation, DOGE and dramatic changes in international affairs are creating uncertainty. Consensus assumed tariffs would negatively affect foreign companies more, given the U.S.'s negative trade balance. |
Tariffs Trump Trade Wars Policy | |
AITechnology and Communication Services stocks underperformed as the Artificial Intelligence trade unwound. However, Chinese technology firms showed surprising progress in artificial intelligence, driving renewed enthusiasm and strong performance in China's equity markets. |
Technology China Innovation Unwinding | |
| 2024 Q4 |
AIArtificial Intelligence fervor drove Technology stocks and Semiconductor industry performance as datacenter buildout and Generative AI pursuit fueled capital spending. AI-related infrastructure investment was a key driver of market leadership in 2024. |
Artificial Intelligence Generative AI Data Centers Technology Semiconductors |
RatesThe Fed began cutting rates in September from 5.33% to 4.33%, but long-term rates rose with the 10-Year Treasury climbing from 3.88% to 4.56% for the fourth consecutive year. This divergence reflects economic growth resilience and above-target inflation expectations. |
Federal Reserve Interest Rates Treasury Yields Monetary Policy Inflation | |
DollarThe dollar posted its strongest quarterly performance since Q4 2016, driven by reduced Fed rate cut expectations and potential negative tariff impacts on trading partners. Dollar strength weighed on international equity performance. |
Dollar Strength Currency International Markets Trade Policy Fed Policy |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 9, 2025 | Fund Letters | Andrew Davidson | MSFT US | Microsoft Corp. | Information Technology | Systems Software | Bull | NASDAQ | AI, Bonds, cloud, Concentration, Credit, growth, Software, valuation | Login |
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