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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Markets rebounded strongly in Q2 with the S&P 500 up 15% as oil prices reversed from $115 to $70 following a Middle East ceasefire. Semiconductor stocks surged 88% on massive AI infrastructure spending reaching $724 billion annually."
Markets staged a strong recovery in Q2 2026, with the S&P 500 gaining 15% and finishing near record highs despite significant headwinds. The Middle East conflict that closed the Strait of Hormuz drove oil to $115 in April, pushing inflation to a three-year high of 4.2%. However, oil reversed sharply to $70 by quarter end following a ceasefire, removing the primary inflation driver. Semiconductor stocks led the rally with an 88% quarterly return, their strongest performance in nearly 30 years, fueled by massive AI infrastructure spending projected to reach $724 billion in 2026. Market leadership broadened significantly, with small-caps gaining 22% year-to-date and outperforming large-caps as profit margins improved from Fed rate cuts and valuations became more attractive. The Federal Reserve shifted from expected rate cuts to signaling potential hikes during the quarter, though easing oil prices may reduce this pressure. Technology stocks showed both the promise of AI transformation and the risks of elevated expectations, with late-quarter pullbacks demonstrating valuation sensitivity. Looking ahead, the path of inflation, sustainability of AI spending, and continuation of market breadth will shape the remainder of 2026.
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