AUM: $1,972,258,363
Investment Strategy, Quarterly Letters & Portfolio Analysis
| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
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| - | - | - |
After a turbulent first quarter, equity markets staged one of their strongest quarterly reversals in years, with the S&P 500 climbing sharply off March lows to close near record highs. The rally was driven by robust corporate earnings, with roughly 85% of S&P 500 companies beating expectations and growth tracking in the high twenties year-over-year. Crucially, this was an earnings-driven rally rather than multiple expansion, with valuations compressing to around 21 times forward earnings. A short-term US-Iran ceasefire caused oil prices to retreat from above $110 per barrel, though the deal remains fragile. The AI trade evolved meaningfully, with semiconductor suppliers surging on explosive demand for high-bandwidth memory while productivity gains diffused across industrials, logistics, financial services, and retail. Market breadth improved significantly, with small and mid-caps outperforming. However, meaningful headwinds remain: high interest rates pressure housing, reaccelerating inflation has pushed Fed rate cuts off the table, and lower- and middle-income consumers face increasing pressure. The second half looks constructive but leaves little margin for error.
After a turbulent first quarter, equity markets staged one of their strongest quarterly reversals in years, driven by robust corporate earnings, easing geopolitical tensions, and a broadening of market leadership that signals a more durable foundation than prior narrow, momentum-driven rallies.
The second half of the year looks constructive on balance, but key variables to watch—the Iran situation, consumer health, and the Fed's path—can shift quickly. The firm will continue to monitor these developments closely and remain ready to act thoughtfully. The manager also notes they are monitoring the impact of blockbuster IPOs, which could impact sentiment.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 14 2026 | 2026 Q2 | - | AI, earnings, geopolitics, inflation, market breadth, rates, semiconductors, small caps | - | Equity markets delivered one of their strongest quarterly reversals in years, driven by exceptional earnings growth and broadening participation beyond mega-cap tech. The AI trade matured as semiconductor suppliers surged and productivity gains diffused across sectors. A fragile US-Iran ceasefire eased oil prices temporarily. High rates and reaccelerating inflation keep Fed cuts off the table, leaving little margin for error despite constructive fundamentals. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIThe AI trade continued to evolve meaningfully during the quarter. While hyperscalers faced investor skepticism over aggressive capital spending, semiconductor suppliers surged on explosive demand for high-bandwidth memory in AI data centers. Productivity gains from AI are increasingly showing up across industrials, logistics, financial services, and retail, signaling a maturing investment cycle rather than speculative boom. |
Semiconductors Data Centers Productivity Infrastructure |
Semiconductor CycleSemiconductor suppliers stood out during the quarter, driven by explosive demand for high-bandwidth memory in AI data centers. This broadening further down the value chain distributes AI's economic benefits more widely, reducing the market's dependence on a narrow group of names at the top. |
Memory AI Infrastructure Data Centers | |
OilOil prices spiked above $110 per barrel earlier in the year but retreated meaningfully following a short-term ceasefire between the US and Iran. The deal is fragile with signs it has fallen apart, and any renewed hostilities would likely trigger a swift reversal in energy prices, making this the single most important geopolitical variable to watch heading into the second half of the year. |
Geopolitics Iran Energy Prices Inflation | |
EarningsAn exceptional earnings season drove the quarter's rally, with roughly 85% of S&P 500 companies beating expectations and growth tracking in the high twenties year-over-year. Crucially, this has been an earnings-driven rally, not a multiple-expansion story, with valuations compressing from their late-2025 peak to around 21 times forward earnings. |
S&P 500 Fundamentals Valuations | |
Small CapsSmall and mid-caps outperformed during the quarter, and the average S&P 500 stock bested the index itself—a healthy sign of broad participation. The rotation into small caps, memory semiconductors, industrials, and other AI beneficiaries has rewarded portfolios positioned across sectors rather than concentrated in a handful of familiar names. |
Market Breadth Rotation Diversification | |
RatesHigh interest rates continue to pressure rate-sensitive sectors, most notably housing. A reacceleration in inflation has complicated the Federal Reserve's outlook, effectively pushing near-term rate cuts off the table—a widely anticipated catalyst that is now unlikely to materialize anytime soon. Markets appear willing to accept this trade-off given current earnings strength, but it leaves little margin for error should growth disappoint. |
Federal Reserve Inflation Housing Monetary Policy |
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