In this research note, we decompose 2Q26 fixed income returns, examine how AI-related corporate issuance is changing fixed income indices, offer our initial assessment of new Federal Reserve Chair Kevin Warsh, and discuss our outlook and portfolio positioning for the remainder of the year.
After more than thirteen years of large cap dominance, anchored most recently by the AI driven rally in the “Magnificent Seven,” small and midcap U.S. equities have led their large cap peers for four consecutive quarters.
Pivotal on New Federal Reserve Chair Kevin Warsh’s reform agenda, is the abandonment of the Federal Reserve’s forward guidance, a multi-decade tradition at the Federal Reserve since the pre-GFC days of Alan Greenspan. In reaction, economists, strategists, and portfolio managers from major institutions as Pimco, Lord Abbett, T. Rowe Price, JP Morgan, and The Conference Board are all on the record that the end of forward guidance will increase market volatility.
As we enter the second quarter of 2026, geopolitical conditions have shifted meaningfully since our last quarterly review.
We believe the energy supply shocks of the 2020s will ultimately prove no less revolutionary for financial markets than their 50-year-old cousins did. Much like the First and Second World Wars culminated in the localization of steel production, over the next two decades, we believe that the shocks of the 2020s will accelerate the use of alternative energy sources for economically critical energy needs.
Drawing on regime analysis, holdings overlap studies, turnover data, and comparative portfolio scenarios, we show that incorporating a core component delivers comparable or superior risk-adjusted returns while reducing costs, simplifying oversight, and providing the flexibility to allocate across the full valuation spectrum within a single mandate.
