Quarter 2

July 2026

As America marks its 250th birthday, the milestone reminds us that progress is rarely smooth, but long-term outcomes are built through resilience, innovation, and discipline. The second quarter reflected that same balance. Despite geopolitical strain, energy price swings, uncertainty around interest rates, and debate over artificial intelligence investment, U.S. stocks delivered strong gains. The S&P 500 and NASDAQ Composite rose 15.2% and 21.6%, respectively, while the Dow Jones Industrial Average gained 13.4%.

One of the quarter’s defining features was investors’ willingness to look beyond short-term disruptions, like the conflict in Iran. The economic backdrop held up well, aided by stable employment conditions, ongoing consumer activity, and robust business investment. Corporate fundamentals were another source of support, with margins holding up, balance sheets broadly sound, and earnings expectations still pointing to expansion. 

Risks, however, remain an important consideration. Inflation could reaccelerate, particularly if energy costs rise again, even as the Federal Reserve appears inclined to move cautiously on interest rates. At the same time, elevated valuations, earnings expectations, and the market’s strong first-half gains may leave less forgiveness for negative surprises.

The current environment underscores the value of diversification. Recent market gains have been driven by Industrials, mega-cap growth companies, and companies tied to AI-related infrastructure. A more durable advance would likely benefit from broader participation across sectors, styles, and regions. High-quality fixed income also continues to play a useful role by providing income potential, diversification, and portfolio flexibility as yields respond to inflation and policy expectations.

Our outlook remains cautiously constructive. Economic activity is expanding and earnings trends remain favorable, but market prices already reflect considerable optimism. We continue to favor disciplined rebalancing, quality, adequate liquidity, and diversified allocations. America’s 250th anniversary is a useful reminder that durable progress is not measured by a single quarter or market cycle. Portfolios should be positioned to participate in growth while retaining resilience through normal periods of uncertainty.

Securities offered through M Holdings Securities, Inc. a registered Broker/Dealer, Member FINRA/SIPC. Investment advisory services offered through Cornerstone Advisors Asset Management, LLC which is independently owned and operated.

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