The Bull Keeps Bucking: Remain Fearless Secular Bull Market Continues to Offer Opportunity The first half of 2026 tested investors at every turn. A war with Iran temporarily closed the Strait of Hormuz, sending crude oil prices above $700 per barrel and average U.S. gasoline prices above $4.00 a gallon. Yet despite those shocks, the U.S. economy continues to expand above its long-term trend, with growth estimated at 2.2%-2.5% versus a trend rate of roughly 2.7%. Even more remarkable was the stock market's resilience. The S&P 500 gained 15% during the second quarter-the strongest 2Q performance in a mid-term election year and the index's best quarterly return since a 36% surge in 7936. It also ranked as the 12th-best quarter since 1950. For the first half of the year, the S&P 500 was up nearlyl0%, already exceeding its longterm average annual return of roughly 7.0%. Many would ask: how is this possible? The answer is simple: it's all about earnings. Earnings growth for the first quarter came in higher than expected, up nearly 30%, and second quarter growth is estimated at 23% with FactSet stating that 2Q earnings could actually come in above 29%. For the calendar year 2026, current earnings estimates range from 23% to 24%. A large portion of the earnings growth continues to come from Technology and Tech-related companies, and the Energy sector is projected to have a significant increase in earnings with higher oil prices. The Artificial Intelligence {Al) era is here and companies are spending significant capital - $7.0 trillion this year and in 2027 - on the expansion of Al through the buildout of data centers. This spend is contributing to the expansion in earnings. Sectors and industry groups related to Al (such as Materials and Industrials) -the companies that are receivers of the capital {ROCs)-are getting an expansion in earnings of their own. Importantly, earnings are also beginning to expand in mid cap and small cap stocks, which is allowing the breadth of the market (the number of stocks participating in the rally) to expand
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