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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Market leadership broadened in Q2 2026 as the Magnificent Seven lagged while AI-driven semiconductor stocks and small caps surged, with some names returning over 100%. Despite strong performance, S&P 500 valuations near dot-com peaks and rising inflation prompt the manager to emphasize diversification into small caps, value, and cheaper emerging markets."
Armbruster Capital Management's Q2 2026 review highlights a significant shift in market leadership as the Magnificent Seven stocks that dominated the prior three years posted negative returns in the first half, while broader market participation drove strong gains. Small cap stocks led with a 90.7% quarterly return, and AI sentiment propelled semiconductor names like AMD, Micron, and Intel to over 100% gains. The firm's large cap information technology fund returned 42% for the quarter. Emerging markets also delivered exceptional returns, with Taiwan Semiconductor and Samsung benefiting from AI tailwinds while trading at cheaper valuations than U.S. large caps. However, inflation rose throughout the quarter driven by energy price increases, with CPI reaching 3.2% and the Fed shifting from rate cut expectations to potential hikes. The S&P 500's Shiller CAPE ratio stands at 40%, near dot-com bubble peaks, with the top 10 stocks representing 38% of the index. The manager emphasizes that diversification into small caps, value stocks, and international markets is especially crucial given elevated large-cap valuations, even as high valuations don't necessarily signal an imminent downturn.
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