2026.Q2 PERFORMANCE recap
Navigating a Narrow Rally & Shifting Commodities
As of June 30, 2026
The second quarter of 2026 started with a white-hot rally in the stock market, recovering its losses from the first quarter and setting several record highs throughout April (+10.4%) and May (+5.15). The rally was very narrow, with about 60% of the gain coming from just ten stocks. The bond market eked out about a 1% gain, although interest rates spiked higher on hot inflation news, only to moderate with hopes of lower oil prices in June. The labor market remains solid, but inflation is on the rise. The Gold was reduced, then cut entirely from the portfolio. Gold was liquidated by global Central bank to buy oil. Oil had a wild ride, with prices elevated for most of the quarter but ending below pre-war prices. After outperforming in the first quarter, most client portfolios lagged the benchmark return in the second quarter as we did not have enough exposure to memory semiconductors, and several of our top holdings reported speculate financial performance that just got a yawn from investors. However, performance improved towards the end of the quarter compared to SP500.
Stocks
S&P500 rose 13% in Q2. The performance was skewed towards the start of the quarter, as stocks have been losing momentum throughout June. For context, the SP500 was down 4.3% in Q1, so a portion of this gain was a recovery. The two main catalysts behind the gains were the first of many ceasefires in the middle east (discussed in our Outlook section) and strong technology corporate earnings.
Across SP500, revenue grew 11.7% and earnings grew a whopping 28%, crushing analyst estimates for 12% growth. The strongest pockets of earnings growth were those tied to AI: Technology (+50%) and Communications (+46%). Looking under the hood, tech hardware grew profit of 68% whereas tech software grew profit by only 22%. AHIA was overweighted in software with companies like Microsoft (MSFT) and Docusign (DOCU), and did not have enough in the hardware space, other than Nvidia (NVDA) and Advanced Micro Devices (AMD). As Andy and Sean learned in MBA school, “stocks follow earnings”, and this proved true again as the areas of the market with the strongest earnings growth saw the greatest price appreciation.
The hottest area of the market in Q2 was the memory chip manufacturers. These companies made massive profits as there is an under supply of memory chips, leading to massive increases in their costs. AHIA did not participate in this rally as this is a cyclical industry, and although there is a shortage at present, several companies have pledged to dramatically increase production capacity. Eventually, there will be an oversupply of these chips and prices will deflate. In late June, Apple (AAPL) announced price increases across many of its devices due to these memory chips. A spokesperson said the company has “never seen a component price increase this much, this quickly.” This may be the core area of future inflation.
Also, Q2 saw the largest ever IPO – SpaceX. AHIA requested a small number of shares and allocated them across clients, targeting 1% of account value. We used a lottery system so as not to show favoritism to any client over another. We were allocated 155 shares and allocated them across five client accounts. Prior to the IPO, investors sold positions in other growth stocks to invest in Space X, possibly negatively impacting performance.
Commodities
Oil increased from the outbreak of the Iran War in February until peaking a few weeks ago. After as many as thirty-eight peace agreements with Iran, the current cease fire agreement appears to be sticking although not without minor hostilities. Currently, Brent Crude Oil is trading at $70 per WTI barrel. It is difficult to see an ending of the war, but more likely a reduction in military action across the entire Middle East. Although this is becoming a drawn-out issue, it is not as messy as it could have been, and it seems to be moving in the right direction. This has resulted in a choppy, but gradual decline in oil prices, as seen below. Looking forward, traders expect Crude Oil to trade at $78 at year end and $75 this time next year. After inventory restocking of reserves, oil is expected to return to an over supplied market, leading to lower prices. One big factor impacting the oil market is China. China’s oil appetite has been on a diet due to electric vehicles replacing internal combustion vehicles resulting in lower oil demand. Over 50% of auto sales in China are EV’s.
Chart of the Futures contract for June 2027 delivery of a barrel of West Texas Intermediate Oil
Gold and Bitcoin trending down
Say goodbye to the “Debasement” trade. Debasement refers to the investment strategy to protect wealth against the risk of the declining U.S. Dollar. Crypto currencies such as Bitcoin caught investors’ appetite for non-traditional securities whereas gold was the preferred holding for more traditional investors. We liquidated the last of our gold position in the second quarter and we never held a position in Bitcoin. Fundamentally, high interest rates and possibly, a restrictive Federal Reserve policy, are strong headwinds for gold and most likely Bitcoin as well. Should the Federal Reserve not live up to their ‘Inflation hawk talk’, the debasement trade may be back in focus. We believe there are still several compelling reasons to own the asset, but due to its negative price momentum we will watch from the sidelines for now.
The Gold ETF, GLD (GLD), has trended lower since peaking in January.
The Bitcoin ETF, Ishares Bitcoin Trust, IBIT (IBIT) continues to trade lower in a bearish trend.
Fixed Income
Year-to-date the bond market has been quiet with a total return of over 1%. The economic backdrop has shifted. Previously tame inflation has begun to rise dramatically, driven by higher oil prices. A previously cooling labor market, expected to weaken as AI replaces jobs, has proved resilient but lacks growth. This has shifted the expectations from continued rate cuts to the market pricing in a hike by the end of the year. This led to a dramatic rise in the 2-year Treasury yield, which mirrors expectations of the Fed Funds rate, from 3.7% up to 4.1%. Similarly, the 10-year Treasury rose from 4.25% to 4.3%. This is the key rate for mortgages. In response to the rising yields, we added floating rate funds and short duration bonds, which are less exposed to rising rates. Most client accounts saw positive fixed income returns in Q2 that were better than the Bloomberg Aggregate Bond Index that 1% benchmark.
The 2-Year Treasury Bond yield continues higher as investors have priced in rate increases
Economic Outlook for 3rd Quarter & Beyond With a New Federal Reserve Chair
The economy appears to be growing in line with the 2% long-term trend of GDP (Gross Domestic Product). With 1.6% growth in the 1st quarter of 2026 and projected to grow 2.1% for 2026 based on Bloomberg’s survey of economists. While expected growth may suggest a stable linear trend, the details are volatile.
The data trends from the 1st quarter GDP appear to be continuing in the 2nd quarter, with 68% of GDP coming from personal consumption, where growth was a bit soft. Inflation and limited wage gains have led to many consumers being squeezed financially. Conversely, the spending among high-net-worth individuals increasingly accounts for a greater share of the economy. The chart, courtesy of JP Morgan Asset Management below shows this situation.
Spending, being dominated by the high-net-worth individuals, we have witnessed a bifurcation in financial market returns. This is reminiscent of the 1920’s, when the equity market reflected the demarcation of consumer spending with companies appealing to higher income consumers doing better than lower income consumers. Yeti (YETI) and Garmin (GRMN) have produced strong sales and earnings, while Ulta Beauty (ULTA) which appeals to the mass market, has been more challenging despite many innovative new products.
The strongest contribution to GDP during the 1st quarter was capital investment, adding 1% to growth. The massive AI investment was the underlying source of strength. Given the size of the AI investments being made numerous sectors are benefiting, from high tech engineers running the center to the construction workers laying the foundation. While the benefits of AI are just beginning to materialize, as a firm, our research productivity has increased dramatically from the use of the various tools we now have. I am really concerned about the speed and magnitude of the AI investment as shown on the right side of the chart below. Driving that fast with a brand-new tool increases the changes for a few wrecks.
The chart below shows the massive AI investment by just the Mega AI providers.
So: JP Morgan Asset Management
The employment situation is stable but not growing. There are about the same number of employed people from one year ago. New jobs created have offset layoffs and retirements.
Total number of people employed was flat until last month’s uptick
The lack of employment growth has ramifications for economic growth as GDP is a function of the number of people working and their productivity. Fortunately, worker productivity is growing and may accelerate with AI and robotics reshaping many industries.
The economy is generally “okay” but not evenly benefitting all. However, the real big problem is inflation. Various inflation indices are increasing rapidly (CPI + 4.2% and PCE + 6.3% from a year ago). We also look at “personal inflation”, or the increase in the products or services you purchase. Our company’s health insurance premiums have increased by +30%, Live Target fishing lures are up 23%, and a bottle of Cakebread chardonnay at a local restaurant is up about 29%. The Iran war is a new source of inflation increasing the cost of oil, fertilizer and numerous other commodities. The war made the bad situation worse. As mentioned earlier, technology components might be the new “AI”, as to its impact on inflation since so many devices are made with electric circuits.
With inflation running red hot, it is appropriate to discuss the new Federal Reserve Chair, Kevin Warsh. Chair Warsh has an impressive resume working in financial services and political appointments. The most notable issue about Warsh is that he is married to Jane Lauder, with an estimated new worth of over $2.1 billion. Thus, he may be out of touch with the previously mentioned “personal inflation” most people are feeling. It is also possible that family connections got him the Fed Chair appointment, but he is well qualified regardless.
During Federal Chair Warsh’s first FOMC board meeting, he set the priority of “price stability”. What was not discussed is the strategy to reduce inflation. Will short interest rates be increased, or will quantitative tightening be employed to raise long-term interest rates? Either way, when the Fed is in a restrictive economic policy, it’s hard to make money in stocks or bonds, hence the cliché, “Don’t fight the Fed” coined by the late Dr. Marty Zwieg.
There are concerns with the advisors and new policies that the new Federal Chair is considering but first let’s discuss the good. The new leadership wants the Feds’ data sources, communication, and other policies to be reviewed, which are timely and warranted. What is concerning is the political leaning of some advisors, who want to nix the “full employment” mandate and focus only on “price stability”. Their hope is that the Fed will drop or pay no attention to employment with sole focus on inflation. Obviously, this poses problems in the future when the economy falters, especially with minority unemployment rates rising much faster than the public as a whole.
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Investment Strategy for the 3rd Quarter & Beyond
As we outline our investment strategies in constantly changing financial markets, our long-term methodologies remain the same. We aim to position portfolios with laddered bonds approximately equal to annual cash needs over the next five to seven years, generally. Stocks usually make up the residual of the portfolio for long-term growth to replace maturing bonds. Our investment strategy was born from the financial crisis when many retirees who were stuck with illiquid securities could not sell them to cover their living expenses. Our strategy assumes little risk in the near term and extends risk to the long term where the returns are the highest. The chart created by Gemini, an Alphabet (GOOGL) product, shows our investment process graphically
AHIA Portfolio Strategy
With the foundation of clients’ portfolios based on a strong bond portfolio, the changes at the Federal Reserve may be viewed positively by bond investors. Since we concentrate on bonds with high grade issues (most bonds have credit rates of A or higher), lower inflation will increase the bonds’ return, net of inflation. For taxable accounts, municipal bonds remain our favorite investment on a risk vs. return evaluation. Muni bonds have experienced very low defaults, and the interest income is usually exempt from Federal income tax. Among Fidelity’s inventory of bonds available for purchase, we usually look for the highest yield to the bond’s maturity, given our high credit quality standards to meet the appropriate maturity time frame for the client. Being a boutique firm, we often can trade small quantities of bonds yielding above market averages that our larger competitors would overlook.
For IRA and pension accounts, we usually build bond holdings with corporate bonds that yield more than Treasuries. For clients with RMD’s (Required Minimum Distributions), we often have ladder bond maturities equal to these annual distributions.
To enhance the return of a bond portfolio’s, most clients hold a position in the Victory Pioneer Cat Bond Fund (CBYYX). The fund aims to yield about 9% which is about twice the yield of most investment grade bond funds. We have written about this unique bond fund in recent Client Letters so we will not repeat the unique opportunity the fund presents. The second half of the year is typically more favorable for this fund; hopefully hurricane activity is high but avoids insured properties.
Moving to the equity strategy, the only prediction we are confident in is continued high volatility as winners and laggers change. As far as our outlook for the summer and the rest of the year, our hope is for 10% gains of the SP500.
The macro factors usually driving equities include earnings growth, interest rates, and investor sentiment. Earnings growth has been the best in years. SP500 earnings estimate for 2027 have increased dramatically and are expected to accelerate to 16% over 2026. The pickup in estimates is focused on companies in the AI build-out. Price increases are also a key factor in profit margin expansion. Yes, inflation as covered already, can be good for stocks until the Fed kills the fun with interest rate increases. Note, historically, the 3rd quarter is the weakest quarter of the year as limited volume can lead to dramatic movements in stocks due to the lack of traders on the job.
As the chart below shows, while the technology sector is enjoying large price increases that boost profit margins, the other 500 companies are just maintaining their margins.
Interest rate concerns offset the optimism of higher earnings growth. Investors tend to watch the 2-year Treasury that is heavily influenced by Federal Reserve policy and the 10-year Treasury %. If the Fed follows through with its inflation hype, then the 2-year Treasury yield will rise with rate increases, which is usually bad for stocks in general.
Sentiment measures fear and greed of investors. A healthy degree of optimism is needed for the markets to function, but recently investors appear to be a bit too aggressive. The recent SpaceX IPO (Initial Public Offering) at an extremely high valuation is an example of this euphoria. Another measure is the Put/Call Ratio (PCR) which signals excessive optimism. At present, investors believe in Santa Claus, Peter Pan and many other fantasy characters.
Beyond the traditional factors, the number of recent IPO’s has dramatically increased to the highest since 2022. One of the most elementary economic principles is when supply increases, price declines, assuming demand is constant. For several decades, the number of publicly traded companies has declined due to acquisitions, while fewer companies have gone public, creating a favorable situation for equity investors. This year, there has been a flood of IPO’s. Further, with mega offerings like the recent SpaceX IPO, Alphabet (GOOGL) issuing stock, and Nvidia (NVDA) issuing debt, the supply of new capital is starting to push prices lower. The table below shows the performance of recent IPO’s based on data from Investor’s Business Daily.
Digging deeper into our equity strategy, our methodology focuses on investing in businesses with competitive advantages that are sustainable over time, growing sales and earnings, and highly profitable based on return on equity. Historically, this framework has helped our equity performance.
Many companies fit our framework for selecting holdings; however, we must also consider market momentum in various sectors. Lately, we have shifted our top positions from technology to biotechnology. Nvidia (NVDA)’s stock has waned recently, despite excellent financial performance. Their cash flow from operations for the recent quarter was over $50 Billion. Only Saudi Aramco (2222.SR) and Apple (AAPL) had bigger cash flow production in a single quarter. Recently we reduced the position in Nvidia and increased our position in Eli Lilly (LLY), now Eli Lilly (LLY) is the largest equity position in many accounts. Lilly has the leading GLP-1 drug and ironically, conducts research with Nvidia combining computing technology with biotechnology research. Similarly, to Lilly, Vertex Pharmaceuticals (VRTX) has caught the eye of investors as well. Vertex is developing several lifesaving new products to treat kidney disease and type – 1 diabetes.
Our holdings focused on the AI theme over a wide ecosystem. Nvidia (NVDA) remains the alpha in computer capabilities. Fancy data centers don’t run without electricity. Hence, we have several positions in energy production, transmission, and storage GE Vernova (GEV) provides the equipment to producing electricity with gas turbines being the most recognizable product (see NBC’s tour of their Greenville, SC factory;
Nextpower (NXT) is a much smaller but faster energy infrastructure provider. Nextpower (NXT) provides utility scale solar systems with integration of everything except solar panels. The company is international and is focused on capturing market share in the rapidly growing renewable business in Europe. Another energy producer, NextEra Energy (NEE), is positioned to benefit from the AI demand for electrons, except they made a “bonehead” decision to make a takeover bid for Dominion Energy (D), the biggest utility provider to data centers in the US. This large acquisition will be difficult to consummate due to the political implications of paying for the AI supply, which consumers fear. NextEra’s stock has lost about 10% since the announcement.
Our other AI positions include Advanced Micro Devices (AMD) and Arista Networks (ANET), both female led tech companies. In addition, we have a smaller holding in ASML (ASML) that makes the equipment necessary for high-end microprocessors with no current competitors in the world.
With the Iran war hopefully over, GE Aerospace (GE) has caught investors interest. Lower fuel cost and more international travel should lead to a pickup in service revenues for GE Aerospace (GE). Airline schedules have been recently consolidated due to high jet fuel costs in attempt to fly planes with 100% occupancy. GE Aerospace (GE)’s biggest profits come from routine engine maintenance.
While investors have embraced hardware providers benefiting from the AI buildout, software companies have been trashed. Microsoft (MSFT), a long-time core holding, has felt the rath of the selling of software stocks despite producing strong financial results suggesting that the selling may be algorithmic related. On the other hand, Oracle (ORCL) (not held in client accounts), has been very aggressive in AI investment by borrowing billions, but lacks the profit margins enjoyed by other mega software companies. Oracle’s reckless AI strategy may be leading to the entire software industry being lower as other software providers are being painted with a bad brush. With the software companies being as unloved as a skunk at a party, there can be opportunities in this situation.
We have added to three companies caught up in the software debacle and appear to have been unduly punished. Automated Data Processing (ADP), is the largest payroll processor in the US, continues to grow its earnings, pays a 3% dividend, and has an AA- Credit rating from S&P. It’s unlikely that the ADP’s clients are going to transition their payroll processing to an AI agent, given the legal and reputational ramifications of payroll errors. If Automated Data Processing (ADP) can recover the 30% recent decline in their stock price, it could produce an above market return. In addition to Automated Data Processing (ADP), we have added two other smaller companies to client accounts. Docusign (DOCU), the industry leader in “E-signatures” that are generally considered valid by courts, and Blackbaud (BLKB), the leader in enterprise software for not-for-profit organizations. Both stocks trade at ridiculously low multiples of earnings, while still growing their businesses.
To sum up our equity outlook, we are confident that our core holdings will produce strong earnings, but concerns over the market factors limit our optimism. Specifically, the Iran situation could rekindle, IPO’s are diluting the equity market, and the Fed could raise interest rates to combat inflation. These market factors could kill the run up of stock price from a super strong earnings report.
Significant Positions in Client Accounts
Eli Lilly (LLY): Eli Lilly is experiencing explosive revenue growth driven by global demand for its blockbuster diabetes and obesity treatments. The company is prudently investing the proceeds from this cash generator into global manufacturing capacity to resolve ongoing supply shortages and expand its pipeline. Alongside the GLP1’s are an emerging Alzheimer’s franchise (Donanemab and follow-ons) and a broad bench across oncology, immunology, and cardiovascular disease. We view the company as well positioned to advance its current pipeline for years to come.
GE Aerospace (GE): As a standalone powerhouse in aviation, GE Aerospace benefits from a massive installed base of engines and a highly lucrative long-term services business. The stock recently experienced weakness due to higher crude oil prices weighing on global air travel, but the share price has recovered to new highs as oil fell. We view the company’s business fundamentals as exceptionally strong and see no threats to their competitive position.
Vertex Pharmaceuticals (VRTX): Vertex remains the undisputed powerhouse in Cystic Fibrosis treatment while successfully expanding its rare-disease playbook into lucrative new markets. The company is actively scaling two major non-CF commercial launches, Casgevy for gene editing and Journavx for non-opioid acute pain management. Supported by multiple regulatory approvals, positive Phase 3 clinical trial updates, and a multi-billion-dollar balance sheet, Vertex is well positioned for continued steady growth in our opinion.
Alphabet (GOOGL): Alphabet dominates the digital landscape through its core search engine while aggressively integrating generative AI capabilities across its vast consumer and enterprise ecosystem. The company has many subsidiaries, which we believe diversifies the business nicely. We believe that the company’s business fundamentals are strong and expect Alphabet to benefit from a growing digital environment and an expansion in their AI product offerings.
NextPower (NXT): NextPower utilizes advanced robotics and predictive software to optimize utility-scale solar fields and protect infrastructure from severe weather events. The firm’s integrated technology platform is rapidly expanding beyond tracking systems into broader power conversion and AI-driven monitoring. Management completed two acquisitions, positioning the company to provide batteries and storage for data centers. The company is taking constructive steps to capture a larger share of the booming clean energy buildout, positioning the company for sustainable long-term returns.
Nvidia (NVDA): Nvidia continues to solidify its role as the backbone of the AI revolution, driving the global market forward with its superior computer chips. The company maintains incredibly high profit margins as tech and healthcare leaders route massive portions of their capital expenditure directly to Nvidia’s computational hardware. We view the current valuation as attractive due to their rapid annual pace of product development which provides a clear path to future revenue growth in an era of insatiable compute demand. In our view, all roads lead to Nvidia.
GE Vernova (GEV): GE Vernova is a global leader in the energy transition, providing the essential infrastructure needed to modernize the power grid and expand renewable capacity. The company is experiencing a staggering surge in power equipment and natural gas turbine orders, effectively selling out its manufacturing slots through 2030. We believe that management’s focus on streamlining the business and improving operational margins positions GEV well for attractive long-term returns.
Apple (AAPL): Apple recently reinforced its leadership in the consumer ecosystem by updating its operating systems to feature “Apple Intelligence” at their annual developer conference, a move that integrates advanced AI across its billion-plus device base. This strategic focus on privacy-centric, personalized AI is expected to trigger a significant iPhone upgrade cycle among its loyal users. We believe Apple remains well positioned for sustainable growth and supports their strategy of keeping their extremely loyal customers happy with annual updates and improvements.
Costco Wholesale (COST): Costco continues to win customers through its core value pillars of price and membership loyalty, maintaining industry-leading retention rates even in a fluctuating economy. The company’s disciplined cost controls and massive scale allow it to generate strong free cash flow while consistently returning capital to shareholders. Backed by a strong balance sheet and experienced management team, Costco remains a premier holding for sustainable growth.
Garmin (GRMN): Garmin dominates the premium wearable and navigation markets by leveraging its proprietary technology across the aviation, marine, and outdoor fitness sectors. The company’s diversified global brand portfolio and high-margin specialized electronics provide a significant competitive moat against generalist tech firms. We expect the company to benefit from an expanding range of sophisticated data services, driven by management’s long and successful track record of research and development.
Black Diamond Access: Change to Multi-Factor Authentication (MFA)
Effective June 12, 2026, security questions are no longer supported as an MFA method within Black Diamond. Users are now required to authenticate using email validation. If you have any questions, please contact Elicha Moore at 239-450-3999.
AHIA hosts Ian Bartoszek Pythons presentation at Naples Sailing & Yacht Club
As evidenced by the photos below, the python problem in south Florida is a big one. Pythons have devastated the small animal and deer populations. Ian Bartoszek, one of the leading scientists researching the python problem, uses “scout” male snakes to find breading females. Ian is a Wildlife Biologist with the Conservancy of SW Florida, and his research has been featured in numerous scientific publications and was featured in National Geographic in 2022.
Sean O’Brien’s Big Day!
We are delighted to share that our colleague Sean O’Brien recently celebrated his wedding to Haley in beautiful Orchard Park, NY. Please join us in congratulating the newlyweds as they begin this exciting new chapter together.
OUR TEAM
Andrew “Andy”
D. W. Hill, CFA
President and
Co-Founder
Jennifer R.
Figurelli, CTFA
Managing Director
and Co-Founder
Elicha D.
Moore
Client Concierge
Representative
Sean
O'Brien
Associate
Portfolio Manager
