2026 Mid Year Outlook: An eventful six months, and why it didn’t matter

"We can only stand back and almost celebrate the chaos, for one compelling reason: it has nothing to do with us."

— Erik Strid

At the midpoint of 2026, Erik Strid steps back to make sense of one of the most eventful six-month stretches in his 33-year career. A major war. An energy shock. Renewed inflation and the sudden threat of rising rather than falling interest rates. Equity valuations near record highs. The collapse of Bitcoin and the precious metals. And the largest initial public offering in history. His conclusion is a surprising one: we do not actually need to make sense of any of it.

In this mid-year update, Erik explains why a disciplined, broadly diversified equity investor can almost celebrate the chaos rather than fear it, and why the real measure of progress is not the month-to-month level of an index but the rising earnings and dividends of the businesses we own.

The Midpoint of a Remarkable Year

Here we are at the midpoint of 2026, so I thought I would hop on to offer a little perspective on this rather eventful year we have been having in the investment and capital markets. And I am pleased to say that our clients made excellent progress in their financial plans during the first six months of the year.

But please note that I do not mean progress in the narrow sense that client account values rose, although of course they did. Even if account balances had actually been down during this period, in one of the equity market's quite frequent drawdowns, the things that matter most to us would still have produced genuine progress toward our clients' goals. Those things are the remarkable increases in the earnings of our portfolio companies, along with our rising dividend income.

A Six Month Stretch Like Few Others

In my 33 years of experience as a financial advisor, there has rarely been a more eventful six-month period than the one we just passed. We have had a major war. Severe disruption in energy prices, and inflation. The sudden threat of higher rather than lower interest rates, as we had expected. Equity valuations near historic highs, with extreme concentration in the broad market averages. The total collapse of Bitcoin and the other precious metals. And, by far, the biggest initial public offering in history, around, of all things, spacecraft. Have I left anything out?

So how would one go about making rational investment policy out of this crazy maelstrom? The answer, as I believe you will find intuitive, is that one does not, because one cannot. It is at times like this that we can only stand back and almost celebrate the chaos, for one compelling reason: it has nothing to do with us.

Why the Chaos Has Nothing to Do With Us

In practice, we are very broadly diversified equity investors, and we rebalance annually to systematically reduce our exposure to richly valued market sectors so that we can increase our ownership in out-of-favor, and perhaps relatively more reasonably valued, areas. Done patiently and repeated year after year, that discipline is very hard to beat.

It will not have escaped your notice that this is the opposite of what most investors do, especially at times like this. They go chasing the market sectors that have already appreciated the most, in the apparent belief that those winners can only go up even more. Our success, by contrast, was never riding on our ability to predict any of the events above.

Owners, Not Traders

Meanwhile, those of us who see ourselves as long-term owners of consistently superior businesses, as distinctly opposed to traders in the stock market, can only marvel at the extent to which the earnings of those companies have soared, and are continuing to do so. Their profit margins are at all-time highs. And even more than that, they continue to raise their dividends, even as they invest in the innovation and growth of their businesses.

A Correction Will Come, and We Will Ride It Out

Of course, none of this is meant to suggest that this hugely emotionally driven equity market cannot significantly, and even savagely, correct at any moment. It can, and if history is any guide, it will, probably when the consensus is least expecting it.

And because we know that our inability to time a correction like that is total, we are simply going to plan to ride it out, as we always have, and to keep rebalancing into whatever the market gives us. That is the whole discipline, and it is available to every investor willing to practice it.

Helping those you care about

The purpose of our Great Investors series is to help you become an outstandingly successful investor by following the principles of patience and discipline required to prosper as an equity investor. No doubt, "Mr. Market" periodically tests that patience and discipline by subjecting investors to emotional swings, possibly causing many to make a big mistake. Only those who faithfully adhere to a rock-solid investing philosophy will pass those tests.

Successful investing, while always fundamentally simple, will never be easy. You may have a family member, colleague, or friend who perhaps has not fared as well recently, and who you feel might have benefited from the sort of advice you're receiving. Should that be the case, we would certainly appreciate your introducing us to them. We very much enjoy working with you and would welcome the opportunity to offer the same level of planning and service to the people you care about.