2026: Mid-Year Update

Bitcoin and much of the crypto market losing roughly half their value from earlier highs. And, almost as a footnote to all of it, the largest IPO in history, for a company that builds spacecraft. None of this changes the plan. It is simply this year’s version of what markets always do. Yet global stocks still finished the half with solid gains as economic growth held up, corporate earnings stayed resilient and AI-related investment kept expanding. June was a microcosm of the whole half. The S&P 500 slipped -1.0% for the month as the U.S.-Iran conflict pushed energy prices higher and reignited inflation concerns, while the TSX (+0.5%) and European stocks (+4.6%) told a different story, a reminder that no single stock market index tells you what’s actually happening in markets around the world.  All in all, this year the TSX is now up 11.2%, the S&P500 +10.2% (measured in USD), International stocks +10.7% (in CAD) and bonds +2.24%.
 

The Rules Don’t Change, Even When Headlines Do

Please allow me to reiterate a few timeless principles that guide our work together:

• Markets may decline sharply at any time, but those inevitable periods of fluctuation have already been incorporated into your long-term planning and investment strategy.
• It is impossible to know when that drawdown will begin.  It is impossible to know when and where it will bottom. What we do know is that markets have historically rewarded investors who remain disciplined and stay invested through periods of uncertainty.
• You do not “protect” long-term capital by withdrawing it from the stock market. Doing that subjects you to the profound risk that the market will do what it has always done: turn on a dime and race to new highs with you out of it, leaving you forever regretting what you've done. That single mistake can permanently alter the trajectory of your retirement, your financial future and the legacy you leave behind. 
• We are goal-focused, plan-driven, long-term investors. We start by defining your most important financial goals, build a rational plan to achieve them, and then construct a portfolio designed to serve that plan, not the other way around.
• We do not believe that economic forecasts or market timing can be done consistently or successfully.
• We believe the most effective way to capture long-term stock returns is to ride out their frequent, sometimes significant, but always temporary declines through good times and bad.
• We accept stock market fluctuation as the price of admission to receiving the superior long-term returns delivered by stocks.
• We permanently tilt portfolios towards owning more reasonably priced “value” stocks and small/mid-sized companies, since they offer potential for higher returns compared to expensive larger sized stocks.

This Year’s Version of an Old Story

Roughly 35% of the US stock market, measured by the S&P500 index, remains concentrated in a handful of large technology names (aka Magnificant 7), an unusually large share for what is supposed to be a broadly diversified benchmark. This doesn’t tell us when a sharper market pullback is coming, or whether one is even close. It does tell us that the market’s margin for disappointment is thinner than usual, and that we’re seeing a level of valuation stretch and concentration that has, historically, preceded real stock market declines. That’s not a prediction, it happened in the year 2000 and it’s simply the environment we’re investing in right now.  It’s exactly the kind of environment where discipline matters most and is hardest to hold onto.

But trying to build an investment policy around any of this isn’t the job. It can’t be done because nobody can do it reliably or consistently. What we can do instead is remember that none of this chaos changes what the businesses we actually own are doing: their earnings keep growing, their margins remain near record highs, and many continue raising dividends even while investing heavily in their own future.

History offers useful perspective too, and it’s not unique to one index. Since 1950, the S&P 500 has been through 17 declines of 20% or more, roughly one every four and a half years, with an average drop of over 30%, yet it has still compounded at approximately 11.6% annually with dividends reinvested. International developed markets tell a similar story. Since 1970, the MSCI EAFE Index, covering Europe, Australasia and the Far East, has compounded at close to 9.5% annually, through its own wars, currency crises, and multi-decade stretches of underperformance. The lesson isn’t that the S&P 500 is a uniquely rewarding index to own. It’s that broadly diversified stock markets, wherever you find them, have rewarded patient investors who stayed invested through real, sometimes severe, but ultimately temporary declines. Concentrating in any single index, including the S&P 500 at today’s valuations, trades away the very diversification that made this long-term record possible in the first place.
 

Where the Evidence Showed Up This Year

For much of the last several years, our permanent tilt towards smaller less expensive companies felt, at times, like swimming against the tide. Large, expensive growth stocks led the market almost without interruption. The first half of 2026 told a different story. Less expensive small company (“small-cap value”) stocks meaningfully outpaced very expensive larger and expensive smaller company (“small-cap/large-cap growth”) stocks.  These evidence-based or empirically proven strategies we have built your portfolio around, the ones that spent years feeling theoretical, showed up clearly in the numbers this year.

This is exactly why we don’t chase. Different areas of the market lead at different times, often when least expected, and the investors who benefit are the ones who stayed positioned for it before it showed up in the headlines.
 

What Staying the Course Looked Like in 2026

There is no “new ground” to be broken in the core truths of successful investing. The most critical lessons are simple, though not always easy to follow, and this year gave us real reasons to lean on every one of them:

• Stay globally diversified, including exposure to international stocks.
• Accept short-term uncertainty as the price of long-term growth.
• Rebalance when needed.
• Stick to the plan.

Heading Into the Second Half

The first half of 2026 has resoundingly affirmed the value of having a comprehensive financial plan and a clear investment philosophy. We don’t know what the next headline will be, whether it concerns AI valuations, mid-term elections, interest rates, or something not yet on anyone’s radar. We do know how we’ll respond: calmly, systematically, and always in service of your plan. On our end, our team continues to grow to support that work, including Jamie Knipfel, who worked for us as a summer student last summer and has now joined to strengthen how we manage your file behind the scenes.

We appreciate the trust you place in us. Please don’t hesitate to reach out with any questions or concerns. And as always, if you have a friend, colleague, or family member who could use a steady, evidence-based perspective right now, please consider our team a trusted resource for them.
 

Take good care,

Tim Pritchard FEA
Senior Wealth Advisor & Senior Portfolio Manager 
Tel: 416.969.3195
Tim.Pritchard@RichardsonWealth.com

Visit www.PritchardWealth.ca