Q2 2026: The Scenic Route

| July 24, 2026

Half the experience of any trip is the journey to that destination. Whether it'sa dream vacation or a quick trip to the store, the experiences along the journey are sometimes just as memorable as the destination. This same principle applies to markets. Immediate gratification has its appeal, but teleporting to the end of any journey would remove the satisfaction that comes with growth. Is anyone excited about the recent FDA approval of lab-grown meat? It sounds slightly unappetizing and very boring – where is the wild west? Where are the ranchers, the horses, the rolling hills, and the open plains? Where is the hunt for survival and the sense of victory in the provision that comes from that process, rather than simply producing it on demand? While lab-grown meat takes about 2-8 weeks to grow from starter cell to harvestable product (and includes its own journey such as research and innovation), there is a quality loss involved with extreme shortcuts.

The scenic route is what gives meaning to the destination and ultimately shapes the legacy we forge in the process. The world keeps looking for the fast track, and the market keeps showing us that we cannot shorten the journey to success. Success requiresa plan and strategy that is executed over time. We, as advisors and investment managers, are on this journey together, and we are on this journey for the long haul. We are not going to miss ourturnwaiting for a perfect opportunity. Markets change, and our plans evolve with them.

As we continue to monitormarkets, we are seeing positive outlooksregarding inflation, strong earnings growth, and remain confident in the pro-growth market fluctuations despite the Iran conflict still in full swing. Inflation data released this week was constructive. Core Consumer Price Index (CPI), which excludes the more volatile food and energy components, declined to 2.59% year-over-year and posted a -0.02% month-over-month reading.

Consumer spending, however, remains relatively resilient, although conservative. Retail sales increased 0.2% in June, a moderation from May’s stronger reading, largely due to lower gas prices during the month. Excluding gas, sales increased by 0.7%. More importantly, the retail sales control group, which directly feeds into GDP calculations, rose 0.6%.

Manufacturing activity has been particularly encouraging at the tail end of the quarter, which we will continue to monitor in the coming months. The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey showed substantial improvement across nearly every category. The current general activity index jumped to 41.4, its highest level since November 2021, while new orders, shipments, and employment expectations all improved meaningfully. Manufacturing data is often viewed as an early indicator of broader economic trends, making this report an encouraging signal for economic growth moving forward. Although firms continue to report rising input costs and wage pressures, employment expectations over the next six months remain positive. 

Second-quarter earnings season has also begun on an exceptionally strong note. Of the 42 S&P 500 companies that have reported so far, representing 8% of the index, 95% exceeded consensus earnings expectations and 83% surpassed revenue estimates. Companies beating earnings estimates have done so by a median of 16.3%, while expectations for revenue have averaged roughly 3.9%.

Current blended estimates project S&P 500 earnings growth of 24.6% year-over-year and revenue growth of 12.7%, highlighting continued strength in corporate profitability despite an uncertain macroeconomic backdrop. 

Technology remains the primary driver of earnings growth across the index. Current blended estimates suggest the technology sector will deliver approximately 64.7% year-over-year earnings growth alongside 34.3% revenue growth. While market leadership remains concentrated among large-cap technology companies, earnings growth has also been supported by several cyclical and financial businesses,demonstrating broader participation than headline market performance may suggest. 

The DHT Investment Committee has made several adjustments to equity positions in light ofthe current market outlook. We continue to maintain an overweight position in U.S. growth and technology, havingconcentrated our equity exposurein large-cap growth and small-cap holdings, while removing mid-cap exposure due to its continued lag. As part of our ongoing portfolio management and rebalancing process, we completed an omnibus trade across all portfolios on July 16th, removing VIMCX (Virtus Mid-Cap Core Fund) from our Aggressive, Growth, Balanced, and Moderate models and reallocating those positions to VIGAX(Vanguard Growth Index Fund). We believe VIGAX provides broader, more diversified large-cap growth exposure and better aligns with our long-term investment objectives current market outlook. Portfolios were also rebalanced across the board to capture and protect recent gains by replenishing reserve and bond positions, enhancing overall portfolio efficiency and positioning clients for long-term growth.

We continue to see strong market opportunitiesamongst the negative new cycle. Even with the recent uptick in market volatility, our focus remains on the long-term growth drivers that continue to show promise. AI spending remains positive. Coupled with decreasing inflation, accommodative FED, and cash reserves on the sidelines that will be seeking greater yields as rates come down, we see a positive journey ahead for stocks and U.S. markets. Risk factors with Iran continue to center on energy and oil, which will cause a lag in AI development if these higher for longer energy costs persist. It will also continue to put pressure on discretionary spending from consumers as energy consumes a larger portion of their budget.

We also remainvigilantwith the rising levels of credit card debt and continued sluggishness in the housing sector.We still see the FED aiming to lowerrates, which if achieved, will reduce mortgage rates and push more cash into the market over the next 18-24 months.

Together we continue to plan and stay focused on the journey, not just the destination. Sometimes the most meaningful lessons and opportunities are found when taking the scenic route, embracing the experiences and rewards along the way. No one's plan should be on autopilot, and actively navigating your drams and goals is how we serve. As we embark on this journey together, the testimony of our lives will be reflected in the legacy we leave behind.