Quarterly Client Update Q2 2026
As our families gathered to celebrate America’s 250th birthday this Independence Day, we found ourselves especially grateful. While we recognize that no nation is perfect, few nations in history have offered the breadth of freedom, opportunity, generosity, and innovation that Americans have experienced over the past two and a half centuries. We do not take that blessing for granted, and we hope you were able to enjoy meaningful time celebrating with family and friends as well.
The past couple of months also served as another reminder of how quickly the world can change. If someone had told you at the beginning of the year that the United States would strike Iran, oil prices would spike, and the stock market would soon be approaching new highs, would you have believed them?
There has never been more information available to investors, yet it has arguably never been harder to know what truly matters. Every day brings another headline, another prediction, and another expert confidently explaining what markets should do next. Unfortunately, markets rarely cooperate with those expectations. As management author Tom Peters once observed, "If you're not confused, you're not paying attention." That feels especially true today.
One of the observations that stood out to us this quarter is how quickly markets processed the conflict in the Middle East. While many investors understandably expected a prolonged decline, markets recovered quickly and moved higher. History suggests this is more common than many realize. Looking back across decades of geopolitical events, markets have often reacted negatively for a few days before moving higher over the months that follow. By the time most of us have finished reading the latest headline, millions of investors around the world have already incorporated that information into prices.
Another development received far less attention than the daily headlines. While much of the financial media remained focused on a handful of large technology companies, the strength of this year's rally broadened significantly beneath the surface.
Through the end of June, the Russell 2000 Index of smaller U.S. companies was up more than 22% for the year, compared with roughly 7.5% for the S&P 500. More importantly, this wasn't driven by just a handful of stocks. Nearly two-thirds of the companies in the Russell 2000 were positive for the year, the median stock was up more than 15%, and approximately 900 companies were up at least 20%.1
We think that's encouraging. Healthy bull markets are typically characterized by broad participation, with gains spreading across more companies, sectors, and parts of the economy rather than being driven by just a handful of stocks. Once again, the market reminded us how difficult it is to predict where leadership will come from next.
The lesson isn't that geopolitical events don't matter—they certainly do. Rather, it's that consistently predicting how markets will respond to those events has always been extraordinarily difficult. That's why our investment philosophy has never been built around forecasting headlines. Instead, we own thousands of businesses around the world because we believe patience, diversification, and discipline continue to be the most reliable path toward long-term success.
As we enter the second half of the year, there will undoubtedly be more uncertainty. There always is. But uncertainty has accompanied every generation of investors. The remarkable thing isn't that uncertainty exists—it's that despite it, markets have continued rewarding patient owners of great businesses over time.
President Gerald Ford said during America's Bicentennial celebration fifty years ago: "Remember that none of us are more than caretakers of this great country."
That reminder feels just as relevant today. We are grateful to be caretakers—not only of the freedoms and opportunities we've been given as Americans, but also of the resources entrusted to us by each of you. Thank you for allowing us to serve your family and walk alongside you in that responsibility.
Sources:
1Is Debt Fueling the Rally? | Animal Spirits 471 | July 1, 2026
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