Q2 2026 Market Commentary

Market Overview: Resilience Amid Volatility

There is a debate among investors as to whether the current AI-driven bull market is a bubble or a boom and there have been some comparisons drawn between this bull market and the 2000 dotcom market. However, speculative excesses are nowhere near the levels seen in 2000 or 2020. If you refer to the chart below from Ned Davis Research showing the relatively low percentage of Nasdaq companies with rolling 12-month returns exceeding 500%, you will notice a stark contrast to true bubble peaks. Market breadth also tells an important story: over 65% of stocks are down double digits from their highs, and more than 50% are down more than 20%. Does this sound like a bubble to you?

This dispersion creates an environment well-suited to active, research-driven management, which has allowed us to identify and capitalize on compelling opportunities.

Geopolitical and Historical Perspective

The S&P 500 has historically performed well in the years following major U.S. military engagements, with strong gains in the subsequent periods. As of June 30, the forward P/E of the S&P 500 moderated from its peak last year of 23.0 on October 27^th. It now sits in a more reasonable range around 20 amid rising forward earnings, which have reached record territory. This combination of earnings growth and valuation support reinforces our constructive outlook.

Also, analysts currently expect S&P 500 earnings to grow approximately 14-15% over the next 12 months, continuing the strong momentum seen in recent quarters. This robust projected growth, supported by AI-driven productivity gains and resilient corporate margins, provides a solid fundamental foundation for equities even at current valuation levels.

Midterm Election Cycle Strength

While Midterm election years tend to be the most volatile for the stock market, we know that since 1950, the US. stock market has delivered a positive return in every single 12-month period following a midterm election. Since 1934, starting in July of midterm years, S&P 500 returns have been positive in 96% of the subsequent 24-month periods (21 consecutive for the S&P 500 since 1942 and 10 consecutive for the Nasdaq 100 since 1986). This historical consistency supports a constructive outlook as we move through the remainder of 2026. It is reasonable to conclude that the market returns should be robust following midterm elections because companies and market participants have more clarity on policy outlook. Also, we typically have a mixed government after the midterms, causing a policy lock that helps with corporate certainty.

Fixed Income Update

Interest rates have risen in recent months, with the 10-year Treasury yield ending the quarter near 4.44%. This increase has created pressure on our bond holdings. That said, we believe rates are now range-bound for the foreseeable future. With the new Fed Chairman in place, markets expect measured policy adjustments rather than aggressive moves in either direction. We continue to manage duration thoughtfully across high-quality credits.

Near-Term Market Risks

While we maintain a constructive long-term outlook for markets (anchored by strong corporate earnings growth, AI tailwinds, and favorable valuations), several factors could drive a healthy, temporary pullback (potentially 10-20%) in the S&P 500 during the late summer or fall. These are some risks that could provide some opportunities for us to deploy capital or rotate into some promising opportunities:

·         Testing the New Fed Framework: Markets will need to digest the Federal Reserve’s updated approach to inflation and policy under evolving leadership. Any uncertainty around the pace of easing could create short-term volatility, though this should ultimately support a more accommodative environment.

·         AI Capex Strain and Hyperscaler Dynamics: Surging capital spending by big tech could pressure free cash flow and lead to higher debt loads in the near term, potentially disappointing investors if returns take longer than expected to materialize.

·         Gradual Unlock of SpaceX Shares: A phased release of insider and early-investor shares could introduce temporary supply pressure in growth-oriented names and broader market liquidity, though this is a one-time event unlikely to derail the secular uptrend.

·         Cumulative Shortage of Petroleum Products: Potential energy supply constraints could potentially lead to price spikes, feeding into near-term inflation concerns or sector rotations; however, broader disinflation trends and AI-driven efficiencies should mitigate longer-term impacts.

·         Elevated Margin Debt: Margin balances and asset growth in levered ETF products have risen sharply (up significantly year-over-year), increasing the risk of amplified selling if volatility spikes. We see this as a classic late-cycle dynamic that often precedes buying opportunities rather than a structural concern.

These risks are consistent with normal market corrections and do not alter our high-conviction positioning for long-term wealth building. We stand ready to deploy dry powder opportunistically.

Disclaimer

This material does not constitute an offer or the solicitation of an offer to invest with in BrightHaven Financial Advisors, LLC (the “Advisor”).

This material is confidential and may not be distributed or reproduced in whole or in part without the express written consent of the Advisor’s partners. The Advisor is registered as an investment adviser with the Alabama Securities Commissioner (“Commissioner”). Registration with the Commissioner does not constitute an endorsement of the Investment Manager or the Fund by the Commissioner.

The information in this document is not personalized investment advice or an investment recommendation on the part of the Advisor. No representation, warranty, or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained in this document, and no liability is accepted as to the accuracy or completeness of any such information or opinions. This material is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisers before engaging in any investment transaction.

The Advisor’s investment program does not mirror a Comparative Index and the volatility of the Advisor’s investment program may be materially different from the volatility of Comparative Indices. 

This material contains certain forward-looking statements and projections regarding market trends, investment strategy, and the future asset allocation investments, including indicative guidelines regarding position limits, exposures, position sizing, diversification, and other indications regarding the Advisor’s strategy. These projections and guidelines are included for illustrative purposes only, are inherently predictive, speculative, and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. The guidelines included herein do not reflect strict rules or limitations on the Advisor’s investment program and the Advisor may deviate from the guidelines described herein. There are a number of factors that could cause actual events and developments to differ materially from those expressed or implied by these forward-looking statements, projections, and guidelines, and no assurances can be given that the forward-looking statements in this document will be realized or followed, as described. These forward-looking statements will not necessarily be updated in the future.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.