Tactical Changes August 2026

Hello Friends!

Equity markets are entering the latter part of the summer in familiar territory. Corporate fundamentals remain solid and earnings have generally been supportive, but uncertainty continues to grow around several of the forces that could determine the market's next direction. Election season is ramping up ahead of the November midterms, and while political outcomes rarely determine the long-term direction of markets on their own, this election could be consequential as investors consider the potential implications for economic and fiscal policy. Combined with the direction of interest rates and the future of corporate earnings, the election could become one of several catalysts for either extending recent gains or marking a turning point.

Interest rates remain perhaps the biggest source of uncertainty. The new Federal Reserve leadership has done little to clarify its intentions, and the lack of transparency surrounding the Fed's direction has contributed to some nervousness in both stock and bond markets. Long-term Treasury yields have moved higher, with the 30-year yield recently reaching its highest level in nearly two decades, while real yields have risen and the yield curve has steepened. The bond market appears increasingly concerned about inflation and the possibility that rates may need to remain higher or move higher from here. Stocks, meanwhile, would clearly prefer lower rates and greater clarity from the Fed. This tension between the stock market, bond market and Fed policy is likely to remain an important influence on valuations and investor sentiment.

There are also some early signs that investors may be preparing for a change in market leadership. Artificial intelligence remains a powerful investment theme, but enthusiasm is becoming somewhat more selective as investors increasingly expect companies to demonstrate tangible results from their sizable AI investments. At the same time, higher long-term interest rates create an additional hurdle for the growth-oriented technology companies that have led much of the market's advance. Some sector rotation may be an indication that investors are beginning to look beyond the usual technology-based market leaders for opportunities elsewhere. Whether this rotation proves temporary or more sustained remains to be seen, but it is another trend worth watching as we move through the second half of the year.

There was one tactical change in Provizr portfolios for the month of August. In the Specialty Bond rotation, Floating Rate bonds replace High Yield bonds, for the first time since January. This move reflects the bond market trend of rising bond yields. So sit back and relax knowing Provizr is working for you! 😊

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