July 2026
Featuring
Jeff Sarti, Chief Executive Officer and Partner, Morton Wealth
Meghan Pinchuk, Chief Investment Officer and Partner, Morton Wealth
U.S. stocks were down almost 5% in the first quarter. Then up 15% in the second. On paper, the first half of 2026 looks fine. But underneath those numbers, there is a concentration in semiconductor stocks that just had their best quarter in history, an AI spending wave that is running well ahead of the revenue it is producing, margin borrowing at all-time highs, and a consumer savings rate approaching low 2007 levels.
In this episode of Financial Commute, Chief Executive Officer Jeff Sarti and Chief Investment Officer Meghan Pinchuk walk through what happened in Q2 2026, what the signals in the data are telling them, and how they are thinking about portfolio positioning when the market is this disconnected from the fundamentals.
0:00 – Cold open: semiconductor stocks just had their best quarter ever
1:16 – Welcome and Q2 market recap: stocks up 10% for the first half of the year
2:37 – The big story: semiconductor stocks up 80% in a single quarter
3:38 – Buyer beware: the boom and bust cycle of computer chips
5:41 – The AI data center buildout and the companies spending hundreds of billions
7:41 – When does the spending actually translate into revenue?
8:51 – Competition and depreciation: two reasons the AI spend may not be sustainable
11:21 – Record margin borrowing and the rise of leveraged ETFs
13:43 – Stock market valuations at or near all time highs
16:01 – Gold pulls back after a massive run, but the long term thesis holds
17:54 – The national debt and why the government keeps debasing the dollar
19:48 – The Fed's impossible position: inflation up, economy sluggish
21:37 – Closing thoughts: why diversification beyond stocks and bonds matters now
How did the stock market perform in the second quarter of 2026?
US stocks were up approximately 15% in Q2 after falling nearly 5% in Q1, bringing the year-to-date return to roughly positive 10% for the first half of 2026. International stocks followed a similar pattern, down about 1% in Q1 and up about 11% in Q2. The headline numbers look solid, but the episode delves into what is driving those returns and what risks are embedded in the composition of that performance.
Why did semiconductor stocks go up so much in 2026?
Semiconductor stocks as a group had their best quarter ever in Q2, up over 80% for the three-month period. Some individual names like Intel and Micron were up close to 200%. The primary driver is AI-related demand: the hyperscalers are spending heavily on data centers that require massive quantities of computer chips, and that demand surge lifted the entire sector. Jeff is careful to flag the other side of the historical record: semiconductors are among the most cyclical sectors in the market, with drawdowns of 45 to 80 percent in prior cycles.
Is the AI spending by big tech companies sustainable?
That is the central question Meghan and Jeff raise without claiming to have a definitive answer. Google, Amazon, Microsoft, and Meta are collectively spending close to $1 trillion annually on AI infrastructure, funded increasingly by debt rather than free cash flow. The revenue being generated by AI tools is growing but is not yet close to justifying the pace of spending. Jeff also raises the depreciation problem: unlike railways or fiber cable, computer chips degrade quickly, which means these data centers may require significant replacement spending within a few years of being built.
What are leveraged ETFs and why are they a concern?
A leveraged ETF is a fund designed to deliver two or three times the daily return of an index or individual stock, in both directions. Over 600 leveraged ETFs now exist in the market, holding close to $200 billion, with more than 400 of them tied to single stocks rather than diversified indexes. This category barely existed five years ago. Jeff describes it as a sign of speculation and even gambling in the marketplace because their rapid growth signals that retail investors are increasingly comfortable using borrowed exposure to amplify bets. This pairs with margin or borrowing balances reaching all time highs.
Why did gold pull back in early 2026 if the thesis is still intact?
Gold was down approximately 7% for the first half of 2026, after gaining roughly 25% in 2024 and over 60% in 2025. Meghan acknowledges that, short-term, gold will likely be volatile and cites rising interest rates as a potential reason for this pullback. Since gold does not pay a yield, higher rates elsewhere create an opportunity cost for holding it that can create short-term volatility. She and Jeff both say the pullback was not surprising given the magnitude of the prior run, but that the long-term thesis, dollar debasement driven by structural deficits and compounding interest expense, has not changed.
What is a K-shaped economy and why does it matter for investors?
A K-shaped economy describes a situation where two distinct groups are experiencing very different economic conditions at the same time. In this case, the wealthiest households are still spending at high levels and largely insulated from financial stress, while a large portion of the population is struggling to cover basic expenses and is saving at rates near the lows last seen in 2007, just before the financial crisis. For investors, Meghan says the K shape matters because it complicates the Fed's job: the data that would support lowering rates and the data that argues against it are both real, just describing different segments of the economy.
The headline return for the first half of 2026 looks reassuring. The story underneath it is more complicated. Knowing that semiconductors are nearly 20 percent of the S&P 500, that margin borrowing is at an all-time high, and that the spending driving this quarter's gains may not translate into proportional revenue is the kind of context that belongs in every investor's thinking right now.
Interested parties may include...
At Morton Wealth, quarterly updates like this one are part of how we make sure clients understand not just what the market returned, but what is actually driving those returns and where the risks are building. If anything in this episode is relevant to questions in your own plan, that conversation starts with your advisor.
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This market performance summary is presented for educational purposes only and should not be relied on for investment recommendations. Data presented herein is as of June 30, 2026. References to specific investments are for illustrative purposes only and should not be interpreted as recommendations to purchase or sell such securities. Past performance is no guarantee of future results. All investments involve risk including the loss of principal.
Although the information contained in this report is from sources deemed to be reliable, Morton Wealth makes no representation as to the adequacy, accuracy or completeness of such information. You should consult with your financial advisor to thoroughly review all information before implementing any transactions and/or strategies concerning your finances
Index Information:
References to “US Stocks” herein refer to the S&P 500 Index. “International Stocks” refers to the MSCI EAFE Index. “Semi-conductor Stocks” refers to the Philadelphia Stock Exchange Semiconductor Sector Index. All indexes are unmanaged, and an investment cannot be made directly in an index. Index returns do not include fees and expenses.
Index Definitions:
The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. The S&P 500 Index focuses on the large-cap segment of the market; however, since it includes a significant portion of the total value of the market, it also represents the market.
The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
The Philadelphia Stock Exchange Semiconductor Sector Index is a modified market capitalization-weighted index that tracks the 30 largest U.S.-listed semiconductor companies involved in the design, distribution, manufacturing, and sale of microchips. It often serves as a primary benchmark for the global chip industry.
