With headlines lurching from one extreme to another, clarity remains elusive. The ongoing conflict in the Middle East, the resulting pressure on global oil supply, and a market that has pulled back from recent highs — it is not an easy environment in which to feel confident. We understand that. And we want to share our perspective on what we are seeing beneath the surface.
The S&P 500 has declined approximately 9% from its recent high. The high-profile technology leaders — referred to as the “Magnificent Seven” peaked last October and have fallen roughly 17% from that level, nearly twice the broader index’s decline. Predictably, investor sentiment has turned cautious. Even with the minor correction in 2026, the S&P 500 is still up around 19% over the past year.
Here is what makes the current moment particularly interesting: despite the turbulence, corporate earnings are not only holding up — they are accelerating. The 52-week rate of change for 12-month forward earnings estimates has reached 19%, even as the market has moved into risk-off mode. Earnings estimates, in other words, have continued to climb while prices have come down. That is the true sign of improving value.
Equities will become more appealing as they correct further, supported by positive earnings growth and now lower valuations. Our valuation model has identified many attractively valued companies, from small-cap to large-cap, including many of the names we currently hold. Our portfolio strategy aims to seize opportunities while managing market volatility.
Nobody enjoys a market correction. But they do create something useful: an opportunity to rebalance, to add to positions at better prices, and to realign portfolios with long-term goals. This one will produce those opportunities, as corrections always do — sooner or later.
Moments like this one are a useful reminder of why investment discipline matters. Our approach has always been straightforward: remain invested in businesses with the earnings power, balance sheet strength, and competitive advantages necessary to grow steadily over long periods. We deliberately avoid low-quality companies, those carrying unsustainable levels of debt, and businesses whose models we believe cannot withstand the inevitable pressures of an economic cycle.
Quality, in short, is not a luxury — it is a form of protection. When markets become turbulent and investors grow anxious, it is the companies with durable franchises and financial resilience that tend to hold their ground while weaker businesses feel the most stress.
Of course, it all begins with valuation. Even the finest business is a poor investment if purchased at the wrong price. Our statistical model is currently identifying a meaningful number of attractive opportunities — spanning small-, mid-, and large-cap companies — many of which we currently own, where quality and value align. We view that as an encouraging sign for selective investors willing to look past the near-term uncertainty.
There is another dimension of today’s market that deserves attention: concentration. Index performance continues to be heavily influenced by a narrow cohort of mega-cap technology companies. While the Magnificent Seven remain fundamentally strong businesses, their outsized weighting means that when they decline — as they have recently — they drag index performance down, regardless of how the rest of the corporate world fares. We have seen exactly that dynamic at work over the past several months.
This is precisely why we believe broad index exposure alone is an incomplete strategy in the current environment. Owning the index means owning its concentrations, its vulnerabilities, and its distortions. Careful stock selection, by contrast, allows us to build portfolios around businesses we genuinely believe in — without being anchored to the weight of a handful of names. We expect equity markets to reward selective stock picking over broad-based exposure — and our process is built for exactly this kind of environment.
The market’s extraordinary long-term record has never been a story of uninterrupted progress. It has always been a story of resilience. There is nothing wrong with preparing for periodic adversity — it is exactly why we diversify. But the lesson of history is unambiguous: the investors who stay the course, through corrections and recoveries alike, are the ones who capture the full benefit of long-term compounding.
Timing the market requires being right twice — once when exiting, and again when re-entering. That is an extraordinarily difficult task. Staying invested, diversified, and anchored to a disciplined process remains the most reliable path forward.
As always, we are here to talk through any questions or concerns. Please do not hesitate to reach out. With gratitude for your continued trust.
