The Cornerstone Investment Commentary: 2nd Quarter 2026

Global stocks staged a strong second quarter recovery as concerns about a prolonged, escalating Middle
East war gave way to hopes for a return to some level of economic normalcy. Those who stayed the
course were rewarded.

All equity categories, except real estate, posted double-digit gains as fears abated that reduced energy
supplies flowing through the Strait of Hormuz would spark levels of inflation that could derail consumer
spending and corporate profit growth. The stocks of smaller companies received the biggest boosts and
outgained larger-cap equities while growth stocks outperformed value stocks. With double-digit declines
in both energy and precious metals, commodity returns declined sharply.

Fixed income holdings in both government and corporate bonds registered only small increases due to
rising interest rates in global bond markets and the possibility that spikes in energy prices will cause core
inflation to stay elevated even as energy prices fall. This has caused the Federal Reserve to delay further
interest rate cuts that had been expected when 2026 began.

Looking more closely at the equity rally in light of March’s declines when the Iran War began, it is notable
that second quarter gains of US large growth stocks closed little of their sizable gap with US large value
stocks. International equities maintained their advantage over the U.S. which began in 2025. These
patterns seem likely to persist at least as long as interest rate cuts remain off-the-table.

In this environment, your portfolio’s higher allocations to value and international stocks performed well
and have taken advantage of these shifts in market leadership away from large-cap growth stocks. As we
wrote in April, the conditions supporting this result remain true. This is because technology stock prices –
including artificial intelligence (A.I.) and related companies – are highly dependent on their profitability
outlook. When these are uncertain, their performance lags.

In the coming quarter, we will monitor, rebalance and adjust your portfolio as seems prudent and
warranted by these global economic conditions. We are also evaluating opportunities to add exposure to
short-term, high-quality corporate bonds to replace some comparable-maturity U.S. government bonds
through a fund maturing in 2-3 years, as it currently offers higher yields.

As always, we welcome your comments and questions and look forward to our next conversation. We
wish you an enjoyable, pleasant summer and thank you for the continuing opportunity to work together.