The BIG Report: July 2026

I grew up on the Eastern Shore and have spent my whole life around the Chesapeake and Delmarva Peninsula. If you have too, you know the summer drill. You’re outside on a beautiful afternoon, you pull up the radar on your phone, and it is lit up like a Christmas tree. Angry red cells all around you. You hear thunder rolling in from the west and watch the lightning off in the distance. And then nothing. The storms slide right past and you never get a drop and your grass gets browner. Or one builds right over the top of you and it is on, wind and rain and the whole works, over almost as fast as it started.

That is this market as we pass the halfway point of the year. The radar is covered in red. So far we have not taken a direct hit. And as any waterman will tell you, that can change in a hurry.

The first cell on the screen is the wild volatility inside technology. For most of this rally, the chip makers (the companies that build the semiconductors behind artificial intelligence) could do no wrong. Then in early June, the whole chip group fell about 10% in a single day, the worst day since the early COVID crash. Why should you care? Because of what that kind of move has meant before. Jonathan Krinsky at BTIG, a market technician whose work we follow, pointed out recently that chips have shot up relative to the rest of the market at a pace we have only seen a couple of times in history, the clearest example being right before the dot-com peak in 2000. That is not a prediction. It is a weather warning. 

The second storm cell is inflation. Prices rose 4.2% over the past year as of May, the hottest reading in about three years, driven mostly by the jump in oil and this matters because of who is steering the Federal Reserve now. We have a new Fed Chairman, Kevin Warsh, and he is deliberately going quiet. For more than twenty years the Fed has told the market, more or less, what it planned to do next. Warsh is ending that. His first policy statement was cut down to about 130 words and he has made clear he intends to run the Fed the way Alan Greenspan did in the 1990s, when the Chairman never explained himself and the rest of us had to figure it out. We think this is a real change, and we are treating it as one. Since the Fed will no longer hand us the map, we have hired Ian Shepherdson's firm, Pantheon Macroeconomics, to be our dedicated read on the Fed going forward. Shepherdson was known for some of the most prescient and accurate Fed predictions during Greenspan’s tenure. 

The third cell, and the one that simply will not leave the radar, is the war with Iran. A memorandum signed in mid-June was supposed to end the fighting and reopen the Strait of Hormuz, the narrow channel that carries about a fifth of the world's oil along with helium, fertilizer etc. Then over one recent weekend the two sides traded strikes again, Iran hit targets in Bahrain and Kuwait, and the strait was disrupted all over again. Oil has fallen back to the mid $70s, which is a relief at the pump, but here is the part that concerns me. To hold prices down through the conflict, the country drew our national emergency oil reserve down to its lowest level since 1983. Notice how these last two cells connect. The hope that inflation keeps falling depends on oil behaving, and oil behaving depends on Iran staying quiet. Is Iran truly resolved? Not even close.

Behind all of this, the economic data is okay but genuinely mixed. The consumer is still spending and the job market has held up better than expected, which is good. But other readings have softened, and "okay but mixed" is exactly the kind of unstable air that lets storms build in the first place.

There is one more cell I want to point out, because it is the one that can drop out of a clear sky with almost no warning producing hail and a potential tornado. For years, large investors around the world have borrowed Japanese yen for next to nothing and then used that cheap money to buy stocks and bonds here in the States. It works beautifully right up until the yen suddenly rises. When it does, those investors have to sell whatever they are holding in a hurry to pay back the loans, and the selling feeds on itself. We watched it happen back in the summer of 2024. Japan nudged its rates up by the smallest amount possible, the yen jumped, and within days Japan's stock market had its worst day since 1987 and our own market had its ugliest day in about two years. Japan is slowly raising rates again, which is exactly why we are watching this one closely. It is calm right now but it can turn violent fast, and most people never see it coming.

So what are we doing while the radar stays this busy? We have been watching it closely and trimming aggressively. The plain truth is that the reward for taking risk today is not as generous as it was a few years ago, when stocks were cheap and everything was on sale. When you are paid less to take risk, you take less of it. In practice, that means we are carrying more cash and higher quality bonds that are finally paying us real interest to wait, and we are leaning on genuine diversification, including pieces built to hold up when stocks and bonds struggle at the same time. The whole portfolio is deliberately carrying less risk than usual right now. We would rather be a little early and dry than late and soaked.

Do we think a storm actually hits? Between now and the midterm elections in November, we think the odds for a short and strong one are high. This is not just weather watching, as midterm years have historically been the most turbulent of the four year election cycle, with the deepest market pullbacks of the four. Markets hate uncertainty, and an election delivers plenty of it.

But here is another half to the story. Bay storms blow through, and the air behind them is some of the cleanest and coolest all summer. Some of the most beautiful sunsets come after some of the nastiest storms. The market has tended to behave the same way. Going back to 1946, the S&P 500 has been higher twelve months after every single midterm election, with the gains averaging around 16%. The rebound off the low in a midterm year has been one of the strongest stretches in the entire market cycle. So if the storm comes, we do not intend to simply ride it out. We intend to use it. Depending on conditions at the time, we will look to put our cash to work and position for what has historically been a powerful rally from the midterms through the following spring.

You do not cancel summer on the Chesapeake because storms pop up on the radar. You keep one eye on the screen, you keep the boat ready, and you make sure you are not caught far from the dock when the sky turns. That is exactly how we are managing your money right now. Watchful, prepared, and ready to move the moment it clears. If any of this raises questions about your particular situation, call the office. That is what we are here for.

Be safe, enjoy your summer, and thank you for your trust and confidence. 

David F. Boothe

President, Chief Investment Officer