By: Darren W. King | Wealth Management
Source: Bloomberg, Inc.
Key Takeaways:
Equity Strategy
Earnings growth exceeding expectations was the story in the second quarter. The AI boom and higher earnings for energy stocks propelled equity gains in the second quarter. Currently, the market is estimating 24.1% earnings growth on 10.8% revenue growth in 2026. Corporate tax cuts, accelerated depreciation incentives for capital expenditures, continued AI server spending, and historically high profit margins should drive further gains despite slightly elevated equity valuation levels domestically. We continue to favor cyclical sectors over defensive stocks and advise the continued diversification into a larger international, small cap, and value allocation.
Fixed Income Strategy
Within the fixed income markets, interest rate, Fed policy, and market traders see the Fed on hold in the near term until signs emerge that the current bout of inflation that has presented itself from the Iran conflict abates. Our outlook is for interest rates to move lower following the Iran energy inflationary scare. For reference, the 10-year treasury yielded 3.94% at February month-end and is now trading at 4.54% on July 7. With bond maturities and reinvestment, we are extending duration and buying longer-dated maturities to take advantage of this run up in yields while it holds.
Click here to read the entire Q2 2026 Market Review.
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