Wait... Hold Up - Do All Years Go By This Fast?

The first six months of 2026 felt like a full year compressed into a manic New York minute. Technology advanced by the day, geopolitics interrupted the tape, and markets moved repeatedly between acceleration and chicken-braking. 

Our job is not to match the market's speed at every turn. It is to participate when the road is open, protect capital when visibility falls, and keep enough reserve to act when opportunities are presented. 

In the pages below we share thoughts on the last six and next six months.

Three Observations At Halftime

We did not beat the S&P 500 Index (+10% total return) in this first half. We did earn 8% net-of-fee return with 62.7% in stocks and the balance spread across fixed income, commodities, and cash. That distinction matters: the S&P 500 is a 100% equity index, while our mandate is to compound capital with a measured amount of risk. 

The result followed an epic 2025 for Global Vigilance (up 28% net of fees*), which made position sizing more important than chasing the last dollar of upside. We trimmed where appreciation created concentration risk, held reserves rather than chase, and kept the portfolio aligned with its moderate-risk objective. 

*See below for performance disclosures for Global Vigilance composite. 

A Pleasant Problem Is Still A Problem

Exceptional gains created an enviable quandary: when should we pay taxes to reduce risk? 

We trimmed several winners, including Micron and gold-miner exposure. Taxes are a cost, but concentration is a risk. When a position grows faster than the portfolio's risk budget, disciplined trimming is not a loss of conviction; it is how conviction survives. 

Tax decisions and trading may differ by account. See Important Information. 

One Portfolio. Many Parts.

A portfolio should not ask every holding to do the same job. Each security has a clear assignment: stocks for growth, fixed income for risk reduction and income, commodities for real-world shocks, and cash for optionality.  

Intact, But The Hurdle Is Higher

Our annual letter argued that AI is a multi-year investment cycle - not a short-term fad - and that the enabling layer of chips, memory, design tools, data centers, power, and energy infrastructure would capture a meaningful share of the economics. 

At midyear, the thesis remains intact, but the market has raised the bar. Expectations are higher, valuations are less forgiving, and even good news can be met with selling. The AI trade is now crowded. 

Earnings Are The Scoreboard

Calling AI a bubble is too simple. The relevant test is not whether the prices are high - but whether cash flows can grow into them. Corporate operating earnings and profit margins remain near record levels. That does not eliminate valuation risk, but it is different from a market supported only by enthusiasm. 

AI is also broadening from builders to users. The next wave should reward businesses that turn AI into productivity, pricing power, or better decisions. Our additions to selected healthcare and biotech exposure reflect that transition. 

Three Questions To Silence The "Noise"

What Could Prove Us Wrong

AI capital spending could slow; higher rates could compress long-duration valuations; narrow leadership could make the market brittle; geopolitical or commodity shocks could pressure margins. 

The Election Cycle

We are watching mid-term elections carefully. The switching of political power can create volatility in the market. In fact, a 10% pullback around elections would be normal. Buckle up for a wild election cycle. In the end, a balance of power should be rewarded by the markets, but the uncertainty and noise could cause even more volatility.