Happy 250th birthday, America (and week ended July 3, 2026)

Happy birthday to the United States of America, a country that is celebrating its 250th birthday today.   

One can’t help but be amazed at how a country formed by immigrants developed into the most powerful and arguably successful country in the world in only 250 years.  In a time of heated political discourse and rampant bipartisanship, it is very easy to lose sight of what has made America such a successful country economically, militarily and politically.  The US is a thriving democracy built on the economic pillars of capitalism.  Americans and foreigners can criticise the country for the “baggage” that travels with its economic model – and there is some (wealth inequality being top of my list).  However, in spite of its shortcomings, the results for America very much speak for themselves, loudly and clearly.  

America has many advantages: a large and relatively young population; “protection” by seas on both its flanking shores; abundant natural resources; geographic beauty and diversity spanning the 4^th largest country (geographically) in the world; a “regulation-lite” approach to business; the deepest capital markets in the world; support for entrepreneurs and new ideas; and a democracy that works.  Those on the other side of our current president and the Republican-led Congress might think things have never been worse.  However, you have to step back and acknowledge that the U.S. is a great democracy because when the pendulum swings too far one way or the other, the electorate can express its opinion and change directions.  It is easy to let political discourse get you down, especially if you feel you are not doing well economically.  However, “living in the moment” is not what America is about – it is about prosperity, diversity, hope, and long-term economic growth.  As we have seen time and time again over the last 250 years, poor political decisions cannot derail the mighty U.S. economy easily.   Investors have an uncanny way of adapting to the context and carrying on.   

In spite of the country’s greatness, Americans should never forget their roots.  The country’s greatness is derived from many generations of immigrants over several centuries.  And that’s the core of what has made America great – not “great again”, but nearly always great from its birth.  With that discourse out of the way, let me wish all of my fellow Americans a very happy Independence Day!

Markets last week, and 1H2026

Markets last week were somewhat muted aside from the semi-conductor sector which continued to swing wildly.  There seems early in the third quarter to have been some visible rotation back to Europe and other recently “out-of-favour” sectors that were better off before the U.S.–Iran war.  We will see in the coming weeks if this rotation has legs.  As equities determine their new course awaiting the release of second quarter earnings, the bond market lost ground even with a weaker-than-expected June jobs report.  The jobs data did however push out the timing for expected Fed Funds rate increases, perhaps providing some relief for risk investors.   This did not really settle the bond market though, which clearly remains concerned about elevated inflation.  Also, Mr Trump can’t seem to leave the Fed’s independence alone, but that’s his style sadly.  Investors don’t like it, so other than the president’s vindictive streak craving retribution which appears from time to time, he should have learnt by now that undermining the Fed is to his disadvantage.  Please stay away!

First half performance

Below is a table that shows the performance of indices and assets tracked by EMC in the first half of the year.  

Tech did fine in the first half of 2026, as you can see by the performance of the NASDAQ.  However, if you are a “US-only” investor in equities, you have missed some more juicy gains abroad.  Small caps have also clearly performed, a long-awaited rotation into value that has finally yielded dividends for patient investors.

The U.S.–Iran War was a clear inflection point for many asset classes, sectors and indices.  With the two countries now trying to put some “meat on the bones” of the short 60-day MoU, things hopefully will return to normal, or as normal as possible.  There will be long-term effects of this conflict, and I don’t see them as positive for the U.S. at least not economically.  But time will tell.  For now, oil prices have fallen sharply, and investors largely have said “meh” even as skirmishes continue in the region.  The conflict and its aftermath all appear now to be in the rearview mirror.  More importantly for investors is the question of stock valuations, and specifically, if companies can deliver as strong of results in the second quarter as they did in the first.  We shall know in the coming weeks, but herein lies the principal risks of equities as they are currently priced for perfection.

My portfolio

I have taken a bit more money off the table at these levels, and I might continue to dial back risk or ramp up hedges in the coming weeks if some of these stock price increases keep coming.  However, I have not made material changes, as you will see in my 1H2026 portfolio update coming soon.  I am smart enough to know that the hypothetical opportunity cost of sitting out this decade+ rally, expecting the sky to fall, has been extremely costly to investors that are in cash, not in terms of actual losses but in terms of the huge opportunity cost that has been forgone.  Long may it continue, but I have to admit that I expect some serious bumps in the road as we look to the second half of this year.

MARKET DATA AND TABLES

Below are tables of key indices and asset prices that have been updated for the past week. 

_________________

**** Follow E-MorningCoffee on BlueSky, and please like and comment on my posts right here on my blog. You need to be a subscriber, so please sign up. Thanks for your support. ****