As summer winds down and September begins, investors are navigating a market shaped by strong corporate earnings, continued investment in artificial intelligence (AI), changing expectations for interest rates, and ongoing geopolitical uncertainty. While markets have experienced periods of volatility, the overall backdrop remains supportive.
Corporate earnings continue to be one of the strongest supports for stocks. Second-quarter earnings growth for the S&P 500 is tracking at a strong 31%, excluding mark-ups of investment holdings, while analysts continue to raise their forecasts for the second half of the year and 2027. Earnings growth has also been broad. Excluding large non-recurring charges from two healthcare companies, all 11 S&P sectors would have grown earnings by at least 9% in the quarter.
AI remains another major focus for investors. Recent results and comments from major technology companies have reinforced expectations that continued AI investment can support innovation and future growth. Strong outlooks from companies including NVIDIA, as well as software companies that some investors view as vulnerable to AI disruption, have helped support AI-related stocks.
Overall, we remain constructive on stocks, supported by strong corporate earnings, a resilient U.S. economy, and continued AI investment. As appropriate, some investors may want to consider above-target allocations to stocks relative to bonds, while also considering diversifying investments that may help reduce portfolio volatility. With midterm elections approaching and monetary policy and geopolitical uncertainty still elevated, periods of market volatility should be expected.
For fixed income investors, inflation remains a concern and expectations for Federal Reserve policy continue to shift. We continue to emphasize high-quality bonds while limiting interest rate sensitivity. Municipal bonds may also offer attractive income potential and diversification, with yields still elevated compared with recent history.
September and early October have historically been weaker periods for stocks, although that seasonal pattern has been less pronounced following a strong first eight months of the year. We don't believe short-term market patterns should drive long-term investment decisions, but they are worth keeping in perspective as we move into the fall.
In the months ahead, we will continue to monitor the markets and look for opportunities as they arise. A disciplined, diversified approach remains important when markets are being pulled in different directions by interest rates, earnings, geopolitics, and economic policy.
As always, please reach out to me with questions. Thank you for your continued trust.
Sincerely,
Ed
Important Information
This material is provided for general informational and educational purposes and is not intended as individualized investment advice or a recommendation for any particular investor, security, or issuer. There is no guarantee that any investment strategy discussed will be suitable or produce positive results. Investing involves risk, including possible loss of principal.
Economic forecasts and other forward-looking statements may not develop as expected and are subject to change. Company names and securities mentioned are provided for educational and illustrative purposes only and should not be considered a solicitation or recommendation.
The S&P 500 is an unmanaged index of 500 U.S. stocks representing major industries. Indexes cannot be invested in directly.
Bonds are subject to market and interest rate risk. Bond values may decline when interest rates rise, and bonds may be subject to availability and changes in price.
Diversification does not guarantee improved returns or protect against market risk. Asset allocation does not guarantee a profit or protect against loss. Past performance does not guarantee future results.
All data is provided as of September 2, 2026. Index data is provided by FactSet.