Summer Update
We hope this note finds you and your families doing well.
Lately we've been thinking about a quote often attributed to Mark Twain: "History doesn't repeat itself, but it often rhymes."
So far, 2026 has certainly lived up to that idea. We've experienced periods of volatility, unsettling headlines, and plenty of reasons for investors to question whether changes should be made. Yet despite those challenges, the market finished the second quarter with its strongest quarterly return since Q2 of 2020, when COVID-19 was creating unprecedented uncertainty.
As we mentioned in our last newsletter, we remain cautiously optimistic about the economy. That said, we are now in the middle of July, and historically it is not uncommon for markets to move sideways or experience increased volatility during the heart of the summer. Midterm election years, in particular, have followed some interesting historical patterns. Since 1930, the average return during midterm election years has been approximately 7%. However, when volatility remains relatively subdued during those years, equity markets have often gone on to produce much stronger returns.
Our partners at BlackRock recently put together the chart below illustrating historical market performance during midterm election years.
One of the questions we've been asked most frequently lately is whether today's market resembles the late-1990s Dot-com bubble or whether this cycle is fundamentally different.
Going back to the Mark Twain quote, history rarely unfolds exactly the same way. We found the following chart particularly interesting because it compares the performance of technology stocks during the Dot-com era with today's AI-driven market.
During the Dot-com bubble, technology stocks appreciated approximately 1,097% before peaking. By comparison, the current AI-driven rally has generated returns of approximately 569%.
While this doesn't eliminate the possibility that portions of the market could become overvalued, our view today is that we have not yet reached the same level of excess that characterized the Dot-com era. Unlike many technology companies in the late 1990s, many of today's market leaders are generating significant earnings, cash flow, and free cash flow that support their valuations.
We continue to see meaningful headline risks, including geopolitical tensions, inflation, and the path of interest rates. With those risks in mind, we made several portfolio adjustments approximately one month ago.
Key portfolio changes:
· Reduced our equity overweight from 3% to 1%, modestly lowering overall portfolio risk after a strong market advance while maintaining an overweight to equities relative to bonds.
· Maintained our core overweights to U.S. large-cap stocks and AI-related investments, where corporate earnings continue to support our highest-conviction themes.
· Refined our international exposure by utilizing a more active country-selection approach to capitalize on opportunities where differences between countries are greatest.
· Added a dynamic, multi-strategy liquid alternatives allocation within the fixed-income sleeve to seek additional diversification and provide a potentially more resilient source of returns during periods of market stress.
Horst & Graben News
We have been fortunate to have a summer intern each year for the past ten years. It has been incredibly rewarding to watch so many of them begin successful careers after their time with our firm.
Today, several former interns are thriving in the financial industry—including professionals at Goldman Sachs and Fidelity Investments, another working in commercial real estate in San Diego, and, of course, our favorite success story, Elizabeth, who is now a valued member of the Horst & Graben team.
This summer we are excited to welcome Emma Shields.
Emma grew up in Portland and graduated from Catlin Gabel before heading to New York City to attend Fordham University. She is entering her senior year, pursuing a B.A. in Economics with a minor in Marketing.
Since joining Horst & Graben in May, Emma has gained firsthand experience in wealth management by sitting in on client meetings, contributing to projects across multiple departments, and helping grow our Instagram presence @horstandgrabenwealth (we'd love for you to follow along!). Through these experiences, she has developed a deeper appreciation for the importance of clear communication and strong client relationships.
After graduating next spring, Emma hopes to remain in New York City and build a career in financial services marketing.
As always, we sincerely appreciate the trust you place in our team. Thank you for allowing us to be part of your financial journey. If you have any questions or if there is anything we can help with, please don't hesitate to reach out. We always enjoy hearing from you.