MARKETPOINT
The Market Exhales
If the first quarter of 2026 tested investors’ patience, the second quarter rewarded it. After stocks posted their worst quarter in four years to open the year, the S&P 500 and Nasdaq delivered their best quarterly performance since 2020, with major indexes finishing June around record highs.[1] Dynamics like these reinforce a principle at the heart of our approach: enduring investment success generally comes not from timing the market’s turns, but from time in the market itself. Our focus remains on owning durable businesses through full market cycles — portfolios built to weather difficult stretches and to participate in the recoveries that follow.
Three forces, two directions
Three forces shaped the quarter — two propelled markets higher, while a third tested their resilience. The first was earnings. Specifically, growing evidence that major corporate investment in artificial intelligence is currently translating into real revenue for certain sectors of the economy. First-quarter profits for S&P 500 companies grew roughly 27% year over year, with technology driving over half of that growth, and second-quarter expectations climbed steadily. Fixed business investment rose 10.6% in the first quarter as spending on equipment and intellectual property surged, a reminder that the AI buildout is now a meaningful engine of the broader economy, not just a stock market story.[2]
The second was geopolitics. The preliminary peace framework between Washington and Tehran, announced in June, unwound the risk premium that had gripped energy markets since late February. Crude prices fell back toward pre-conflict levels, easing that specific inflation pressure that had weighed on consumers and corporate margins alike. Markets that had spent the spring pricing in worst-case scenarios were allowed to exhale.
The third force cut the other way — and it’s one we’re watching closely. Inflation re-accelerated, with headline CPI reaching 4.2% in May, driven largely by energy costs that predated the peace framework. Core inflation, at 2.9%, remained closer to target but stubborn. At his first meeting as Federal Reserve Chairman, Kevin Warsh held rates steady at 3.5%–3.75% and notably removed the Fed’s prior easing bias.[3] Markets that began the year expecting rate cuts ended the quarter contemplating the possibility of a rate hike instead.[4]
The economy itself, meanwhile, continues to walk the line the Fed hopes it will. May payrolls rose by a solid 172,000, well above expectations, with the prior two months revised higher — yet wage growth stayed tame at 3.4% for the year, and unemployment held at 4.3%.5 A labor market that adds jobs without stoking wage inflation gives the Fed room to be patient, and gives the expansion room to continue.
Beneath the surface
The major indices posted strong double-digit gains for the quarter — enough to erase the first quarter’s losses and put year-to-date returns comfortably in positive territory. International markets, which had carried the early months of the year, continued to advance at a healthy clip, while bonds delivered modest gains through a choppy quarter for interest rates. Emerging markets remain the year’s standout, propelled by earnings growth rather than multiple expansion.
Below the headline numbers, the quarter demanded selectivity. While AI infrastructure and semiconductor names posted some of the largest quarterly gains on record, the software industry endured a drawdown approaching 30% — even as the broader S&P 500 never fell more than a few percentage points from its highs.[6] Market leadership also shifted away from some of the largest technology names of the Magnificent 7, with the remaining 493 companies in the S&P 500 doing more of the lifting. To us, this is less a warning than a healthy reminder: owning “technology” is not a strategy. Owning durable and innovative businesses at sensible prices is.
Putting conviction to work
During the quarter, we exited several positions where the investment case no longer matched our original reasoning, most notably in healthcare, and redirected that capital toward higher-conviction holdings already in most client portfolios. We continue to favor quality companies with strong balance sheets, pricing power, and the ability to self-fund their growth, while deliberately reducing concentration in the frothier corners of the market.
In fixed income, we see a genuine opportunity. With the 10-year Treasury yield closing the quarter near 4.50%, the risk-reward of extending duration appears more attractive than it has in recent years. For certain clients, including those holding excess cash in money markets, we are discussing whether intermediate and longer-term bonds may be appropriate in light of current yields and individual investment objectives. This could enable clients to possibly lock in today’s yields before a cooling labor market or slowing economy brings them down. History supports the math: starting yields have explained the majority of forward bond returns, and today’s levels imply potential annualized returns near 5% over the next five years.[4]
On the horizon
We see real risks worth respecting. Inflation remains above target, and a Fed that has shifted from cutting to contemplating hikes could unsettle markets that have priced in a smooth path. Equity valuations sit well above their long-term averages, leaving less room for disappointment, and the market’s reliance on AI-related earnings means any stumble in that story would be felt broadly. That equities powered to records against that backdrop speaks to the strength of earnings — and counsels a measure of humility about valuations, with the S&P 500 now trading at roughly 20x forward earnings versus a 30-year average of 17x.4 The peace framework in the Middle East is preliminary, and geopolitics has already shown this year how quickly it can reprice energy and other markets.
But we see genuine opportunities as well. Bond yields offer an attractive entry point for longer-term income, in our opinion. Market leadership is broadening beyond a handful of technology giants — fertile ground for selective, research-driven investors. International and emerging markets are being rewarded for earnings, not just sentiment.
The long view
It’s natural to feel uneasy investing at all-time highs. The data suggests otherwise: since 1950, the average five-year return following an all-time high has actually exceeded the average return from all other days.[6] Record highs are not necessarily warnings; instead, they can represent what long-term compounding looks like while it’s happening.
Consider, too, that nearly every major asset class spent part of this year in negative territory — and most now sit near the top of their ranges. Investors who overly reacted to February’s headlines likely missed June’s records. The lesson of 2026 so far is the oldest one we know: diversify sensibly, stay invested, and let time do the heavy lifting. That is what we will strive to keep doing on your behalf.
As always, we welcome your questions — about markets, your portfolio, or anything on your mind.
[1] FactSet Research Systems, Data through June 30, 2026.
[2] J.P. Morgan Asset Management, “Economic Update,” June 29, 2026.
[3] Bureau of Labor Statistics, “Consumer Price Index – May 2026”.
[4] J.P. Morgan Asset Management, Guide to the Markets – U.S., data as of June 30, 2026. There is no guarantee of this outcome and actual results may differ materially.
[5] Bureau of Labor Statistics, “Employment Situation Summary – May 2026”.
[6] FactSet Research Systems, Data through June 25, 2026. Past performance does not guarantee future results, and historical market patterns may not repeat.
FINANCIAL PLANNING
Privacy and Wealth: Two Things Worth Protecting
Cybercriminals aren’t just going after corporations anymore. Individuals and families — especially those with financial assets — are increasingly in their crosshairs.
According to the FBI’s 2025 Internet Crime Report, Americans lost $20.9 billion to online crimes last year, up from $2.7 billion in 2018. The most common threats: phishing, extortion, investment fraud, and personal data breaches. And the starting point for most attacks isn’t sophisticated hacking — it’s information that’s already out there. Data brokers, the dark web, social media, and stolen passwords give bad actors everything they need to get started.
The scale of exposure is sobering. Seven in ten family households have passwords circulating online. One in four people has malware on a personal device. One in five smart homes can be accessed remotely by strangers. The threats are real, but so are the defenses.
Here’s where to start:
- Safeguard your accounts. Enable multi-factor authentication on your email, financial, healthcare, and social media accounts. Use strong, unique passwords for each — and consider a password manager to keep track of them securely. Reusing passwords across accounts is one of the most common ways attackers gain access.
- Secure your home network. Set up a separate guest Wi-Fi network, keep smart home devices updated, and periodically scan for vulnerabilities. Your thermostat and doorbell camera are entry points too.
- Protect your devices. Run anti-malware software on every device, keep operating systems and apps current, and when in doubt — don’t click.
- Harden yourself against social engineering. Most attacks exploit people, not technology. Be skeptical of unsolicited calls, unexpected alerts, and messages from friends asking for something unusual. Scammers are patient and persuasive.
We work with established firms that specialize in personal cybersecurity and digital privacy protection. If this is something you’d like to explore, we’re happy to make the introduction — just reach out.
RECOMMENDED LISTENING
Between quarterly letters, we’re often asked how to stay informed without drowning in financial noise. Podcasts have become one of our favorite answers — easy to fit into a commute, a hike, or a chairlift ride, and often more thoughtful than the daily headlines. Here are three that we recommend to clients.
- Odd Lots (Bloomberg): Hosted by Joe Weisenthal and Tracy Alloway, Odd Lots explores the corners of markets and the economy that rarely make the front page — from the mechanics of the Treasury market to global shipping, commodities, and supply chains. Episodes are driven by genuine curiosity and outstanding guests. If you’ve ever wondered how something in the financial world actually works, this is the show that asks.
- The Journal (The Wall Street Journal): A daily podcast that takes one important business or economic story and tells it well in about twenty minutes. The Journal pairs the paper’s reporting depth with strong narrative storytelling, making it an efficient way to understand not just what happened, but why it matters. It’s the closest thing to a daily briefing we’d recommend.
- On Investing (Charles Schwab): Hosted by Schwab’s Chief Investment Strategist Liz Ann Sonders and Chief Fixed Income Strategist Collin Martin, this weekly conversation covers the economy, equity markets, and interest rates with data-driven clarity. It’s a good window into how experienced strategists are thinking about the current environment — measured, substantive, and refreshingly free of hot takes.
As always, no podcast replaces a conversation about your own plan. But if you’re looking to deepen your understanding of markets between our meetings, these three are a good place to start.
FIRM UPDATE
New Team Members
We are delighted to welcome two new team members to our growing team.
Steve Fleischer, CICCP®, General Counsel and Chief Compliance Officer: Steve oversees all legal and compliance matters for the firm. He brings more than 20 years of experience as a legal and compliance professional in the asset management industry, most recently serving as Deputy General Counsel at Thornburg Investment Management and, before that, as Managing Director and Associate General Counsel at Perella Weinberg Partners, where he led legal matters for the firm’s outsourced Chief Investment Officer (OCIO) platform. Steve holds a law degree, with Distinction, from the University of Iowa College of Law and a Master of Arts in International Relations from the Johns Hopkins School of Advanced International Studies (SAIS). He also serves on the board of the Home Builders Foundation, which helps people with disabilities across the Denver area live more independently.
Susan Lilly Gerock, Chief Technology Officer: Susan leads Obermeyer’s technology strategy and infrastructure, shaping the technology vision that supports the firm’s investment operations, client experience, and continued growth. She brings more than 30 years of IT leadership experience, most recently serving as Senior Vice President and Chief Information Officer at Elme Communities, where she led enterprise-wide technology transformation across cloud, cybersecurity, and business intelligence. Susan earned a Master of Science in Management of Information Technology from the University of Virginia’s McIntire School of Commerce and a Bachelor of Arts in Government and Economics from The College of William & Mary.
Awards
FORBES 2026 BEST-IN-STATE ADVISORS
Obermeyer Wealth team members were once again featured in Forbes’ Best-in-State Advisors ranking for top advisors in Colorado on April 7, 2026. The annual ranking includes President Ali Flynn Phillips, Senior Vice President Dana Nightingale, and Vice Presidents Brian Brady and Brooke Gais for 2026.
“It’s an honor to see members of our team recognized, but the real credit belongs to all of my colleagues,” Ali said. “Every client relationship at Obermeyer is supported by the full depth of our firm, and that collaborative approach is what makes this work so rewarding.”
The independent third-party ranking is compiled using interviews and a combination of quantitative and qualitative data. To view the complete rankings, visit Forbes’ website. Neither Obermeyer Wealth nor its advisors paid a fee to be considered for the ranking.
Disclosures
FORBES BEST-IN-STATE WEALTH ADVISORS
The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research, is based on an algorithm of qualitative criteria, gained through telephone, virtual and in-person due diligence interviews, and quantitative data. Those advisors that are considered have a minimum of seven years experience, and the algorithm weighs factors like revenue trends, assets under management, compliance records, industry experience and those that encompass best practices in their approach to working with clients. Portfolio performance is not a criterion due to varying client objectives and lack of audited data. Neither Forbes nor SHOOK receive a fee in exchange for rankings.
Please remember that different types of investments involve different degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those Obermeyer Wealth Partners undertakes or recommends), will be profitable or will equal any historical performance level. Certain portions of Obermeyer Wealth Partners’ newsletters may contain a discussion of, or provide access to, Obermeyer Wealth Partners’ (or other investment and non-investment professionals) positions or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer reflect current positions or recommendations. Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Obermeyer Wealth Partners, or from any other investment professional. Obermeyer Wealth Partners is neither a law firm nor an accounting firm, and no portion of the newsletter content should be interpreted as legal, accounting, or tax advice. A copy of Obermeyer Wealth Partners’ current written disclosure statement discussing our business operations, services, and fees is available upon written request or by using the links above. If you are an Obermeyer Wealth Partners client, please remember to contact us in writing if there are any changes in your personal or financial situation or investment objectives so that we can review, evaluate, and potentially revise our previous recommendations or services. If any reader has questions regarding the applicability of any matters discussed in this newsletter to his or her individual situation, we encourage you to contact your professional advisor to discuss the matter. Rankings or recognition by unaffiliated rating services or publications are not a guarantee that a client or prospective client will experience a certain level of results if Obermeyer Wealth Partners is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as such or as a current or past endorsement of Obermeyer Wealth Partners by any of its clients. Rankings published by magazines and others generally base their selections exclusively on information prepared or submitted by the recognized adviser. Rankings are generally limited to participating advisers. This communication is provided for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. References to market indexes are provided for illustrative purposes only. Indexes are unmanaged, do not incur fees or expenses, and are not available for direct investment. Information presented has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed.
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