2026 Market Perspective and What’s Next
We’re happy to provide you with our mid-year report. We find it beneficial to review the very eventful first six months of 2026 before setting our sights on the second half of the year.
As always, we divide this note into two parts: a restatement of our timeless investment principles and policies, followed by whatever current observations can sensibly be drawn from this most turbulent half year.
General Principles:
We are goal-focused, plan-driven, long-term investors, working over years and even decades toward the attainment of your most important financial goals.
The sequence of our decision-making process is: first to quantify your goals, then to make a rational plan for achieving those goals, and finally to create a portfolio suited to your plan.
Unless your goals change, there may not be reasons to alter your plan. And if your plan remains in place, so—broadly speaking—will our portfolio.
We do not impulsively react to current events, be they economic, financial, geopolitical, or whatever.
We believe that the economy cannot be consistently forecast, nor the markets consistently timed.
Hence, we believe the most practical method to capture the full long-term returns of equities is to remain fully invested in it in “good” markets and “bad.”
Current Commentary:
There has rarely been a more eventful six-month period than the one just past. A major war, severe disruption in energy prices, inflation, the sudden threat of higher rather than lower interest rates, equity valuations near historic highs, extreme concentration in the broad market averages, significant volatility of Bitcoin and precious metals, and by far the biggest initial public offering in history—around spacecraft, of all things. Have we left anything out?
How would one go about making rational investment policy out of this maelstrom? The answer—as we believe will be intuitive to all Windward clients—is that one doesn't, because one can't. It's at such times that we can stand back and almost celebrate such chaos, for one compelling reason: it has nothing to do with us.
As indicated above, we have goals, a plan, and a portfolio as closely aligned with both as we know how to make it. In practice, we are very broadly diversified investors, and we rebalance periodically—the latter to systematically reduce our exposure to richly valued market sectors so we can increase our ownership in out-of-favor (and perhaps relatively more reasonably valued) areas.
It will not have escaped your notice that this is the opposite of what most investors do, especially at times like this: they often go chasing the market sectors that have already appreciated the most, in the apparent belief that they can only go up even more.
None of this is meant to suggest that this hugely emotion-driven equity market can't 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 it is total, we will plan to ride it out, as we typically have.
We’re here to respond to any and all questions and concerns you may have.
Sincerely,
Drew Osborne
CEO, CIO, Senior Wealth Manager
Windward Private Wealth Management
