July 2026 Investment Update
History Doesn’t Repeat, But It Rhymes
There is an old saying, often attributed to Mark Twain, that history does not repeat itself, but it rhymes. That phrase has been on our minds a great deal lately.
The data we are watching right now does not map perfectly onto any single moment in the past. But it rhymes with several of the most consequential ones. And when the echoes start sounding familiar across that many different chapters, we think it is worth paying close attention.
That is the lens we are bringing to June, and to the months ahead.
June Market Recap
June looked different from the steady climb of April and May. Markets were choppier this month, marked by a sharp rotation out of mega-cap technology and into other areas of the market, along with a brief flare-up in tensions in the Middle East that rattled sentiment mid-month before easing. The Dow notched a fresh record, crossing 52,000 for the first time, even as the more tech-heavy Nasdaq pulled back from its May highs.
Figures reflect index levels through June 30, 2026, the final full trading session of the month.
What Drove Markets in June?
A few themes shaped the month and are worth keeping an eye on.
A rotation out of mega-cap technology
After months of gains concentrated in a handful of large technology and AI-related names, June saw a notable reversal. The Nasdaq fell roughly 5% for the month, its weakest showing of the year, while the Dow, helped by gains in healthcare, industrials, and financials, along with Alphabet’s addition to the index, climbed to a fresh record above 52,000. This is a meaningful shift from the narrow, tech-driven rally we discussed last month, and it is too early to say whether it marks a lasting broadening of market leadership or simply a pause before technology reasserts itself.
Valuations at historic extremes
The CAPE ratio, which compares current stock prices to average earnings over the past decade, sits at one of its highest readings in over 140 years of data, surpassed only by the peak of the dot-com bubble around 2000. For perspective: the level that preceded the Great Depression also ranks among the most elevated on record. We are now in that rare company, with valuations sitting well above their own longer-term trend.
The SpaceX IPO
The most talked-about market event of the month was the SpaceX initial public offering, which priced on June 12 in what is being described as the largest IPO in history. It came to market with enormous excitement, but has since pulled back significantly from its early peak. The company does not report a profit, and its price-to-sales ratio stands at roughly 115 times, a figure with no meaningful parallel among large publicly traded companies. For an investor to simply double their money from the IPO price, SpaceX would need to reach a valuation of approximately $4 trillion. We believe SpaceX may prove to be a genuinely transformative company over the long term. But the current price reflects extraordinary optimism that has run far ahead of the underlying fundamentals.
The Federal Reserve and forward guidance
New Fed Chair Kevin Warsh has stated the Fed will no longer provide forward guidance on interest rate policy. At the most recent meeting, the Fed held rates steady. This shift toward opacity introduces uncertainty markets are still absorbing, and it means the next move, up or down, will come with less warning than investors have been accustomed to.
A tightening monetary backdrop
Behind the headlines, the Federal Reserve has been quietly reducing its balance sheet, with the monetary base contracting year over year. This is one of the indicators we monitor closely, and it is moving in a direction that historically has been associated with increased market risk.
The Data Behind Our Caution
We follow a defined set of indicators rather than relying on predictions or market sentiment. Right now, three specific conditions have historically signaled elevated risk of a meaningful market decline, and we are watching all three closely.
First, valuation relative to its own trend. When stock prices run well ahead of their longer-term average relative to earnings, history shows meaningfully elevated risk. That is the situation we are in today. This factor is currently flashing caution.
Second, Federal Reserve liquidity. When the Fed is actively tightening rather than supplying liquidity to the financial system, the historical record turns more cautionary. We are watching this closely, as conditions have been moving in a more restrictive direction in recent months, though they have not yet reached the level we would consider a clear warning sign.
Third, a macro event. A sudden shock, like the collapse of Lehman Brothers or Enron, that causes a rapid break below a key technical support level can trigger a sharp decline. Markets are currently well above that level. This factor is not active, but it is by nature the one that is hardest to anticipate. That is precisely why we do not wait for it to appear before positioning defensively.
When we look back at every period in history where valuations were this stretched relative to their own trend, we find only a handful of comparable moments: the dot-com peak, the lead-up to 1929, and 2007. In nearly every case, a significant decline followed. The one exception, the mid-1990s, played out differently because the Federal Reserve was actively expanding liquidity at the time. The opposite is true today.
Positioning Update
In response to this environment, our positioning is largely unchanged. We continue to lean defensive, a stance we have held since last fall.
This is not a prediction that markets will fall. It is a reflection of what the current data supports. Our focus remains on stability and resilience, so that portfolios are better prepared if conditions become more challenging.
In practical terms, that means:
• A higher-than-usual allocation to cash and cash-equivalent positions, which are currently earning a relatively low-risk yield while we wait.
• A tilt toward steadier, more defensive areas of the market, such as consumer staples and healthcare.
• A low-volatility equity fund that has been performing as intended: on days when the broad market is down, this position has been outperforming by meaningful margins and cushioning client portfolios.
Just as important is what we are not doing. We are not retreating from the market. Broad U.S. equity exposure remains part of client portfolios where appropriate, so clients continue to participate in the market’s leading companies, including technology. Our defensive posture is expressed around the edges, not by stepping aside.
The goal is twofold: to help soften the impact if the market does pull back, and to keep flexibility on hand, what we sometimes call “dry powder,” so we can move back toward a more growth-focused mix on better terms when the opportunity comes. When our indicators return to neutral, that is exactly what we will do.
What Matters Most Right Now
We are living through a genuinely unusual period. The data we are looking at now has only a handful of historical parallels, and most of them are chapters people remember clearly.
That does not mean a crash is coming. It means this is a time to follow the data carefully, stay disciplined, and resist the pull of headlines and momentum. Environments like this tend to reward patience more than prediction.
We remain optimistic about where the economy and innovation are headed over the coming decade. Artificial intelligence is likely to be genuinely transformative. Companies like SpaceX may prove to be extraordinary long-term investments. The question is not whether those things are true; it is whether current prices already reflect that future, and whether this is the right moment to lean in aggressively. The data says no.
None of this requires dramatic action. It reinforces the value of staying grounded in a process that adapts as conditions evolve. When the signals change, we will move accordingly.
As always, if your financial situation, goals, or risk tolerance have changed, please reach out so we can make sure your plan still reflects what matters most to you.
Sources
- CNBC and Yahoo Finance, daily market closing data, May–June 2026 (cnbc.com, finance.yahoo.com)
- multpl.com, S&P 500 Shiller PE (CAPE) Ratio, June 2026 (multpl.com)
- Federal Reserve, H.4.1 statistical release, monetary base data, June 2026 (federalreserve.gov)
- CNBC, U.S. markets coverage, June 2026 (cnbc.com)
- TheStreet, “Stock Market Today” daily recaps, June 2026 (thestreet.com)
- SpaceX IPO prospectus and market data, June 2026
Past performance is not indicative of future results. Any references to relative performance are based on internal portfolio observations and are provided for informational purposes only. Indexes such as the S&P 500 are unmanaged, do not incur fees, and cannot be invested in directly. Individual client results may vary based on factors including timing, allocations, and specific investment objectives.
The opinions expressed are those of Strategic Advisory Partners, who reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. There is no guarantee that their assessment of investments will be accurate. This material is for informational purposes only and should not be construed as investment advice. Past performance is not indicative of future results. All investing involves risk, including the loss of principal, and there can be no guarantee that investment objectives will be met.
