2Q 2026: The Broadening Arrives—Be Careful What You Wish For
After a sharp first-quarter decline, markets rebounded strongly in the second quarter, with gains extending beyond the largest technology companies into industrials, energy, financials, and small-cap stocks. In our latest quarterly letter, we examine whether this long-awaited market broadening represents a healthier opportunity set—or simply a rotation from one group of AI winners to another.
We discuss the shifting dynamics behind today’s market, including the divergence between software and semiconductor stocks, the changing valuation landscape for the Magnificent Seven, the outlook for small-cap companies, and the potential impact of a new Federal Reserve leadership team. While enthusiasm around artificial intelligence continues to drive markets, we believe investors must remain focused on a timeless question: are today’s prices justified by future earnings?
As stock prices increasingly move independently from one another, we believe the environment is becoming more favorable for disciplined, fundamental investors. Our approach remains unchanged: focus on business quality, intrinsic value, and opportunities created when markets lose sight of the difference between price and worth.
Click here to read the letter in its entirety.