The S&P 500 and the Nasdaq just completed their best quarterly returns since 2020, driven largely by AI-related memory chip companies. It’s been an impressive run, especially given the headwinds of inflation, geopolitical conflict, and elevated energy prices for consumers.

The key question now: can this party continue into the second half? Between midterm elections, questions around hyperscaler spending on compute infrastructure, and increasing investor leverage chasing returns, there’s plenty to watch.

First, let’s look at the three distinct “worlds” within tech today, and the wide disparity in year-to-date performance:

• The “Magnificent 7,” which I often discuss, are up just 0.13% YTD (essentially flat)
• The software sector (IGV) is down 11%
• The semiconductor index (SMH) is up 73%

In short, heavy spending by large-cap tech on memory and compute has weighed on their own stock performance while significantly benefiting the companies supplying those chips. I would expect some degree of reversal in this trend in the second half.

This brings me to a broader theme— independence – not the kind we’re celebrating this weekend but return independence—generating performance that is not tethered to a handful of stocks dominating major indices. The Magnificent 7 alone account for roughly 32% of the S&P 500, which has boosted results in recent years but may now be acting as a constraint.

As most of you know, I remain a long-term believer in technology and tend to overweight it in portfolios. But why take the most difficult path every year? Are there other routes? Perhaps smoother ones with fewer obstacles to reach the same destination?

This year offers several strong examples of alternative paths delivering solid results, often with less volatility.

The major indices are having an excellent year:

• Nasdaq: +12.42%
• S&P 500: +9.57%
• Dow Jones Industrial Average: +9.01%

The Dow is a good case in point: traditionally more conservative, with dividend-paying, established companies—yet it’s keeping pace with the more tech-heavy indices.

There are also several “off the beaten path” opportunities that have performed well:

• Small-cap value (IJS): +20.5%
• S&P 500 Equal Weight Index: +11.6%
• Telecom (XTL): +46%
• Industrials (XLI): +18.5%

While it’s easy to focus on standout performers like CrowdStrike (+64%) or Marvell (+226%), it’s important to remember that there are many ways to achieve strong returns. Well-managed companies across different sectors can get you where you’re going, often with a smoother ride. We’re always looking ahead to next year’s winners and the next 3-5 years of opportunity. That’s where real value is created, not by chasing crowded trades that could become more volatile as we move through the second half of 2026.

So while it’s not quite the classic “tortoise and the hare,” it may be closer to dividends and value versus hyperscalers and IPOs.

On behalf of all of us at Campus Private Wealth and our partners, we wish you and your families a wonderful Fourth of July!

Best regards,
Bill

P.S. Be on the lookout for our thoughts on taxes and Capital Gains in the coming weeks. With the Markets at or near all-time highs, now might be a good time to think about possibly paying some capital gains taxes in the 2026 tax year.

….Or should I say lack of breadth.  While the market indices have recently hit all-time highs, the underlying breadth of the market may be telling a different story.

Stock market breadth measures the health of a market by counting how many individual stocks are participating in a price move, rather than just looking at the index as a whole.

Think of it this way, with most of the returns largely driven by AI related companies, semiconductors, and hyperscale’s indicates lackluster participation by most of the index’s members.  Historically, this type of limited participation has often preceded periods of correction or drawdown in prices.  

“Weak cumulative breadth lines have tracked with the three-headed monster (crude prices, the dollar, and rates), suggesting that high energy prices, rising rates, and a strengthening dollar are weighing on equities”  Bespoke Research

While stocks are not cheap, there is an argument (in my opinion a slight one) that with all this new AI technology and three of the largest IPOs in history coming out this year, that this party can continue. We are not at dot-com or financial crisis valuations, yet we are not that far off.  On a price-to-sale basis, current ratio is 3.3, above the historical average of 1.8, but still below the 4.0 multiple reached at the peak of dot-com era.

This is more technical than my usual 50,000 feet view but it is important to know where we are and how you may want to think about diversification over the next 12-18 months.

The 3 things to watch closely, inflation, interest rates, and earnings quality. 

Consumer prices rose 3.8% annual rate in April.  Wholesale inflation increased 6% year-over-year in April which was the biggest jump since 2022.  To combat this, financial conditions have tightened, with the 30-year Treasury yield reaching 5.19%, its highest level since the financial crisis.

Though I am not an economist, one-way markets adjust or correct high inflation and inflated asset prices is through tighter credit conditions.  Higher interest rates (cost of borrowing) reduce demand and profit margins.  Lower demand helps bring down inflation, and asset prices adjust accordingly.

So, given all of this, what steps can we take to be proactive or even opportunistic?

• Look for value in both asset classes and industry groups.  Some valuations on Mid and Small cap companies, value stocks, healthcare, financials, and especially international.   International markets significantly outperformed the U.S. in 2025, and in 2026 are not far behind the S&P 500 performance.  Those markets have less exposure to tech and AI, which can provide a buffer in the event of a correction in those names. Recent gains have also been supported by progress on trade agreements between the EU and the U.S. (Tariffs)
• Take profits where appropriate.  Consider trimming some of your biggest winners if they are becoming concentrated (maybe 5 -10% of your portfolio).  Do that in retirement accounts first to defer taxes, but don’t be afraid to pay some Capital Gains taxes near an all-time market high.  That will feel good if we do see a down year or two in the markets.
• Update your financial plan. Finally, act on the one or two items you’ve been putting off- updating wills and trusts, reviewing tax returns, contribution to a Roth at work (no income limits), holding a family financial meeting so everyone knows where you are and what their roles may be.  Consolidating that 401k from 3 jobs ago into your IRA.

At Campus Private Wealth, we always begin with your goals and situation and work to help you achieve them in the most comfortable and informative way possible.

Hope everyone has a great Memorial Day Weekend, and we look forward to seeing you at our upcoming Speaker Series on June 10th.

Best,

Bill

What is happening this first month of the year and how should we navigate the market situation that is 2026? If you have read my last few CIO reports they mostly read, caution, reduce risk exposure, prepare for a correction and tech and communication companies may be ripe for some repricing or a correction. We are seeing that now with software names hitting 2- and 3-year lows, the Mag 7 index is down for the year so far, and AI names are hanging on to gains but not by much.

As the Olympic opening ceremonies kicked off and the Super Bowl was played over the weekend, the stock market is having an interesting run to open 2026.

• The Dow is up 4.4%
• S&P 500 is up 1.6%
• Nasdaq is down .3%.  For investors concentrated in software names it feels much worse.
• The iShares software index symbol IGV is down 21.9%, Applovin is down 39.64%, Salesforce down 27.76% and Microsoft is down 17%.

To explain the fear driving down software stocks in the last few weeks and months I wanted to quote WSJ writer Sam Goldfarb:

“Pressured by growing worries about the disruptive potential of new AI coding tools, shares of large software companies such as Salesforce and ServiceNow have been sliding for months. But now the prices of software-company bonds and loans are also dropping. Right now, the threat posed by AI is vague. But investors have been alarmed by the rapid progress of Anthropic and others in developing tools that make it much easier to write software and streamline complex tasks for professionals. Though such advances could potentially help some software companies increase profit margins, investors still worry they could also put some out of business, as clients develop software themselves or use the plug-ins.”

Change is in the air is a good way to think about 2026… that and it is a year to concentrate on keeping what you have not attempting to grow too much in what looks to be volatile markets. Think accommodative monetary and fiscal policy, rate cuts, $60 billion in tax refunds, higher SALT deduction cap etc. This could keep the rally going early in the year, but the second half does not look a promising.

Consider exposure to growth assets in countries where policy stimulus will be credible and impactful.  International markets outperformed last year and outperforming so far this year with S&P 500 up 1.6% and the MSCI EAFE index up 5.88%.  Some of this is being fueled by the weaker dollar. With European equities I like banks and industrials.  There are not as many tech companies in the European index funds, so we utilize those quite a bit.  Japan could benefit from shareholder friendly policies and economic momentum.  Supply chain advancements in some emerging markets like South Korea and Taiwan.

I would say along with international companies, I really like Mid-cap companies for 2026.  Especially mid-cap value names.  They have strong fundamentals and many occupy a leadership position in a niche market.  Historically trade at a premium to large cap companies but currently trading at lower valuations and could be an entry point.

AI companies continue to be in the headlines and may have a sharp correction coming, especially with a lot of the spending now using debt thus weakening their traditionally strong balance sheets.  The other side of that is Enterprise AI adoption across other industries is a major shift.   Staffing, workflows, innovation, productivity is changing so many businesses at an incredible pace.  Focus on sectors where AI adoption improves margins through pricing power.  Such industries like healthcare, finance, manufacturing, and logistics. 

I would also say Industrials and Banks/Financials is the other area I think can be a place to hide in 2026.   M&T bank up 18.13% this year, Citizens Financial up 16.62%.  Caterpillar and Honeywell both up over 22% to start 2026.

On fixed income I would consider looking outside the US to take advantage of the weak outlook for the US Dollar.

On alternative investments, it looks like private credit may have had its run for the first time since this boom investors are trying to get out and decreasing total returns are driving this exodus.  Hedge funds seem to be back with 2025 starting to perform again with pension plans and endowments adding the most in any year since 2007.  The reason I mention this is these investments can be a good addition to the portfolio for sophisticated investors, but the fact that “The Labor Department is likely to ease the way for retirement plans to include more private equity, venture capital, hedge funds, private real estate or other alternative investments.” (WSJ) is concerning.   As one CEO put it in the same WSJ article “The vast majority of people who own 401(k)s shouldn’t be investing in illiquid, expensive, hard-to-value assets.”  I tend to agree. 

So, with all that I summarize and continue my themes from last year:  Reduce tech and bloated valuation companies in the most tax efficient way possible.  Reduce Growth, add to value, international, midcap.  With money market funds going from over 5% to around 3.5 and expecting to drop further, dividends are important.  CDs and Treasuries for yield.  They may only be 4% but will look great if next year they are 25% lower at 3%.

I hope that your 2026 if off to a prosperous start and please reach to the team at Campus anytime.

Bill

Before I get started, I wanted to add my line from our September CIO report since I feel we are getting so close to a normal market cycle correction and/or a buying opportunity.

So, What Do We Do Now?
Even with this broader market participation, it’s wise to take a balanced approach.

• For those fully invested: consider trimming positions where appropriate, especially if in a retirement plan to avoid capital gains. Realizing gains in 2025 might prepare you better for opportunities in 2026 and beyond as you have funds to add to any asset class that may be on sale not just stocks.
• For those with high cash positions: we’re happy to help you reallocate strategically. With markets near all-time highs, we prefer using below-market limit orders to buy quality names and sectors at better value.  The focus would be in industry groups or international markets you may be underweight in.
• For retirement accounts: You have the flexibility to adjust risk without worrying about tax consequences—take advantage of it.

What I want investors to try and do now is to be disciplined.  If a 10 to 20% drawdown in stocks is going to keep you up at night or change your long-term financial planning goals, then lower risk now.  Do not wait until after the market is dropping since that is a compounding effect as institutions and individual investors have a history of selling into weakness after the fact.  We have been very tax sensitive in our portfolios this year. Taking some gains in taxable accounts may be the right thing to do for some investors. If not, making a capital gains budget for 2026 can be a good strategy.  The best idea is to wait until January and prolong the capital gain tax for another 16 months but, calling the market short term is near impossible.

Plan on how to handle a down year or two in the markets.  We just had 3 nice years in a row so having a down year or two in a row would not be unheard of.   Most of you know I have been tired of hearing about the MAG 7 and their dominant performance on the S&P 500, well now just replace that term with AI.  Artificial Intelligence is part of all our futures but the incredible capital commitment from the top 10 companies is worth watching.  Plus, now they are raising money through debt to fund this investment so their balance sheets will not be as strong. AI hyperscalers have issued nearly $90 billion of investment-grade bonds according to Dealogic. Some are saying the U.S Economy has become hooked on AI Spending.

Don’t get me wrong, AI will be great for many industries not just tech, but getting there it can get over its skis in a hurry, so be patient.  Use fundamentals when investing and do not follow the herds.  If you think power companies will benefit from all the energy AI companies and data centers will need then do the research.  Would I buy that company on fundaments, good management, cash flow, and history of performance?  That is what we are doing every day for your portfolios.

If the market rally continues in 2026 you have quality companies that will continue to grow. If the market corrects and the economic cycle ends, you will have cash to deploy in other asset classes or stocks at better values.

2026 will be the second consecutive year of rate cuts.  Historically in the second year there is some outperformance:

• Financials up 23.1%
• S&P Midcap  up 18%
• Healthcare up 14%

The research firm, CFRA has 3 overweighted sectors for 2026

• Communication Services- Ongoing shift to digital ad spend, 2026 events: Winter Olympics, mid-term elections, World Cup, AI monetization.
• Financials- Lower rates continuing through 2026; Improving credit quality; Expected M&A turnaround; Declining credit spreads.
• Information Technology- Compelling valuations, strong EPS growth improving CapEx visibility, plus beneficiary of lower rates and rising M&A

I do think healthcare and value stocks will be important in 2026.  Energy valuations are good, and dividends are high but will need some catalyst to drive returns so will need some patience.  If the AI machine continues to rule, then industrials could have another excellent year.

Cash rates are going to be lower.  Money market funds were getting near 5% in 2025 and around 4% most of the year, now they are in the mid 3% range.  Rates may go lower.  One strategy would be CDs and Treasuries.  If rates do fall, the value of bonds and treasuries will rise.

A recession is looking a little more unlikely than earlier in the year.  Indicators look to slight economic slowdown but no recession with first Q GDP and maturity of 2026 in the 2.2% range.

Putting my CFP hat on please reach out if you have any year-end tax questions.  One thing I do want to point out is charitable giving and less favorable rules for 2026.  Deductions will be subject to .05% of AGI if you itemize so check with your CPA on bunching multiple donations this year then spread out those donations in future years.  Donor Advised Funds are a good option here but check with your tax professional.

One last thought on AI is that Open AI’s ChatGPT is still the most popular with 800 million users per week, compared to Gemini’s 650 million monthly users but Gemini 3’s advances last week may change things.  And as far as shareholder participation, if you are reading this you either own Alphabet/Google directly or indirectly in your retirement plans and the stock performance year to date and last week is supporting this leadership position.   Open AI is not a publicly traded company the same as Anthropic.

To quote Salesforce CEO Marc Benioff  “I’ve used ChatGPT every day for 3 years and just spend 2 hours on Gemini 3.  I’m not going back. The leap is insane- reasoning, speed, images, video…everything is sharper and faster.  It feels like the world just changed, again.”

Wishing you a lovely Thanksgiving week and a joyous holiday season!

Bill

After a very tough first quarter and brutal start to April, the markets have recovered and at some levels are near all-time highs.  The S&P 500 bounce back in the second quarter still only brought it to a plus 5.2% gain.  Lagging the rest of the world by over 10 percentage points. 

Much of the performance in the S&P 500 is weighted to the Magnificent 7 stocks. We have been encouraging investors to diversify some to the other 493 companies and international markets to find more opportunities.  

Year to date US stocks were up about 6%, developed markets Ex-U.S. were up 19%.   Bonds had a good first half with investment grade corporates up 4.2%.  The top performing sector was Industrials +12.5% with Consumer Discretionary bringing up the rear performing at -4%.

My thinking on the second half is very much the same as the beginning of 2025.  Caution.  Raise some cash, trim larger concentrated positions, then use that cash during market disruptions or corrections to add new companies to your portfolio.  Early April was one of those situations.

There are 9 Key tax law changes for individuals to make note of.  Please see the article from the CST Group of CPAs for some changes coming in 2026 and beyond.

I thought my counterpart CIO, Kara Murphy with our friends at Kestra had a nice summary of what happened in the first half of 2025 in the markets. From Bear Scare to Record Highs – A Resilient Q2 Recap.

All the best for your summer.