2026 has produced more stock market and economic surprises. Most investors woke up on March 1^st to news that the United States had killed the leader of Iran and a full-fledged war had begun. In the weeks that followed, the Strait of Hormuz was closed, and we saw gasoline prices soar and predictions that a barrel of oil would nearly triple in price. From there, it was predicted that inflation had already spiked and that it would continue until the Federal Reserve raised interest rates instead of reducing them as previously predicted. 

Meanwhile, the various stock markets seem to disregard the news of doom and moved upward with some short downdrafts. By the end of June, Small caps led the way, followed by Midcaps and finally the S & P 500. While the S & P 500 earned nearly 10%, the real story were the huge returns in stocks related to AI, data centers and chip manufacturing. Meanwhile, many solid companies in oldline businesses showed solid earnings but little return to show for it. Last year, foreign company’s stock prices steamed ahead but this year saw returns fall back to lower than the S & P 500. 

At home in the United States, President Trump has seen his approval ratings drop and a continued tug of war between the two parties and sometimes within the Republican party over Trump agenda items that involve ICE, voting rights and birthright. While protests are common, politicians continue to pass little meaningful legislation or take up important issues such as the future of Social Security or the national debt.

What’s ahead? Despite all the uncertainty over the midterm elections, the war in Iran, inflation and interest rates, US companies continue to innovate and use AI to produce more revenue with less expenses which leads to higher earnings and higher stock prices. The consensus opinion of analysts at a recent Morningstar conference I attended in Chicago was that inflation is headed lower which will give the Federal Reserve the option to keep rates the same or go lower, both positive for markets.

What can go wrong? Prices by many metrics are high. If earnings continue to increase and investors are willing to buy, prices could very well increase. However, anything that rocks the boat can lead to rapid price drops especially in the shares of companies who’s price has skyrocketed. 

For our team, we continue to monitor markets looking for areas that are showing signs of opportunity while trying to reduce areas that we feel may have gone too far. Unlike, 2025, we have not found another lower risk, lower volatility and high return asset like gold. Instead, we are continuing to keep our foot on the gas and hoping for a second half.

Enjoy your Orion Investment Report. Let us know if you have any questions.