• The first half of 2026 has rewarded optimism. Earnings strengthened, AI investment continues to accelerate, and markets have recovered to new highs.

• Momentum and leverage have reached historically elevated levels. Expectations leave less room for disappointment than they have in several years.

• Today's market may be entering a new phase. For nearly twenty years investors benefited from shrinking public equity supply. That tailwind may now be reversing.

• Future returns may depend less on multiple expansion and more on free cash flow generation, capital allocation, and returns on invested capital.

• Technology revolutions create enormous wealth, but they have historically also attracted too much capital. AI may ultimately follow a similar path.

• We remain constructive on long-term innovation while emphasizing diversification, valuation discipline, and businesses capable of generating durable free cash flow.

In the first quarter of 2026, markets continue to navigate a more complex and constrained environment, where opportunities are increasingly selective and risks less forgiving. In this CIO letter, we examine the forces shaping today’s landscape—from narrowing market leadership to evolving macroeconomic pressures—and what they mean for portfolio construction. As the path forward becomes less broad and more defined, disciplined positioning and thoughtful risk management remain essential.