Perspective at Mid-Year

My wife and our two boys spent last week in Southport, North Carolina, celebrating the Fourth of July with our family. It’s become one of those traditions we genuinely look forward to every summer, and it’s become even more meaningful now with a three-year-old and one- year-old.

The streets are draped in red, white, and blue, American flags sway from nearly every storefront, boats fill the waterfront, and the smell of sunscreen, salt air, and backyard cookouts seems to linger everywhere you go. The parade is still one of my favorite parts of the week. Watching veterans, first responders, scout troops, local businesses, and families make their way through downtown is a simple reminder that, despite everything happening in the world, there are still plenty of reasons to be optimistic about our future.

This year felt especially meaningful as our country celebrated its 250th anniversary. I couldn’t help but reflect on where we’ve been as a nation, the sacrifices that made those celebrations possible, and the resilience that has carried America through generations of uncertainty. Our history has never been a straight line, yet time and again we’ve found ways to innovate, adapt, and move forward.

Mid-year is a natural time to take a similar step back when evaluating the economy and the markets. It’s an opportunity to look beyond the daily headlines and focus instead on the broader trends shaping the investment landscape. Headlines tell us what’s happening today. Trends tell us what’s likely to matter tomorrow. That’s especially important at mid-year, when it’s tempting to let six months of news overshadow the longer-term picture.

While economic growth has moderated somewhat from earlier expectations, the economy is still projected to expand by approximately 2.5% this year. That’s certainly slower than originally anticipated, but it remains healthy growth. More importantly, many of the underlying fundamentals continue to point in a constructive direction. The labor market remains resilient, productivity continues to improve, and both the manufacturing and services sectors are expanding once again. Corporate earnings have now delivered six consecutive quarters of double-digit growth, which continues to be one of the primary drivers behind this positive market. Over the long run, earnings growth has consistently proven to be a far more reliable driver of stock prices than whatever headlines happen to dominate the news cycle.

That certainly doesn’t imply an easy path through the second half of the year. Inflation remains something we’re watching closely, the Federal Reserve appears comfortable remaining on hold for now, and our base case for rates in the second half of 2026 is that we see a pause. No rate cuts but also no hikes. Geopolitical events continue to remind us how quickly uncertainty can emerge, and history tells us that midterm election years have often produced periods of heightened market volatility.

It’s important to note that none of these developments alter our long-term investment philosophy. In fact, we’ve said for years that markets simply don’t move in straight lines. Corrections are a normal part of investing, not a sign that long-term investors should abandon a well-thought-out plan.

One statistic that stood out to me was the amount of cash currently sitting in money market funds: nearly $8 trillion waiting on the sidelines. At the same time, investor sentiment remains remarkably pessimistic despite the market’s resilience. This dynamic of extreme investor pessimism has historically had a continued positive impact on equities. In other words, the market has continued growing in many of these instances.

History has shown that waiting for uncertainty to disappear can often be an expensive decision. Markets have a tendency to reward patience long before they reward certainty, which is why maintaining discipline during periods of uncertainty has consistently proven more valuable than attempting to predict every twist and turn.

As we enter the second half of 2026, we remain constructively optimistic. That optimism isn’t rooted in the belief that every challenge has been resolved or that markets will avoid periods of volatility. There will undoubtedly be more headlines, more uncertainty, and more days when emotions try to convince investors that this time is somehow different. Our optimism comes from continuing to see an economy that is growing, businesses that continue to innovate, and corporate earnings that remain supportive of long-term market growth. Those fundamentals matter far more than the inevitable short-term distractions competing for our attention each day.