Savvy Portfolio Perspectives | August 2026

Breadth of fresh air

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Executive Snapshot

The Verdict

Our regime call is unchanged and constructive: reflation with a Goldilocks bias. Growth is above trend, disinflation is intact, financial conditions are easy, and systemic stress is low. What changed this month is that fundamentals, not flows, are back in control, and they are strong. Second-quarter earnings landed well above already-high expectations, revision breadth is among the steepest on record, and after July's selloff the part of the market we lean into most, Technology, re-rated cheaper even as its earnings power grew. Here is the honest tension: a big Technology overweight can look aggressive after a rally this long, and at the index level the equity risk premium has collapsed to almost nothing, so there is little cushion in aggregate. We hold Technology anyway, with conviction, now better supported by both valuation and earnings, and we hold it inside a broader equity book that also carries equal-weight (RSP) exposure. We made no changes this month. The only question we are weighing is whether to tilt a little further toward breadth.

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Portfolio Stance

• Equities: Overweight. Constructive regime, expressed through breadth, not concentration.
• Fixed Income: Underweight. Tight spreads and a firmer Fed argue against duration, so we hold to earn and do not extend.
• Alternatives: Neutral. Constructive on reflation, but the commodity sleeve is already sized, so tactically neutral.

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Core Driver

What we are managing is the durability of the gains, not their existence, and this month the case for durability got stronger. Fundamentals have reasserted: earnings are beating elevated expectations, the revision path is among the steepest on record, and July's selloff compressed valuations rather than fundamentals, leaving Technology near a 1-year valuation low just as its earnings accelerate. The book is built to work in either of the two states that matter. If mega-cap Technology re-leads, a cheaper multiple on rising earnings carries it. If the rally broadens instead, our equal-weight (RSP) exposure captures the median stock. Either way, we are not betting the outcome on a single handful of names. The lean we are weighing, a little further into equal-weight, tilts toward breadth, not concentration. It right-sizes the book rather than removing anything, and gives up none of the upside if Technology keeps leading.

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Macro Thoughts

Growth: above trend, a two-sided handoff

Above-trend growth remains the anchor. The Weekly Economic Index is running near a 2.68% year-to-date pace, and the Citi Economic Surprise Index sits at +40.5, so the data is still beating expectations.

The hard data is more two-sided. Second-quarter GDP printed a soft 1.5% annualized, while the Atlanta Fed's GDPNow has opened the third quarter hot at 5.9%, an early single-print read we discount for now. The through-line is growth holding above trend, and the real story this quarter is in the earnings that growth is producing.

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Earnings: fundamentals back in control

This is the heart of the case this month. With positioning materially cleaner after July, investors can focus on fundamentals rather than flows again, and the fundamentals are strong. This has been one of the strongest earnings seasons outside a post-recession recovery. Expectations entering the season were already exceptionally high, and companies have cleared them anyway: consensus second-quarter S&P 500 earnings growth has climbed from 22.4% at the start of reporting to roughly 45% today. What stands out is the consistency: results have landed well above already-elevated forecasts almost across the board, not just a high beat rate or an outsized share of companies topping their implied moves. That is what produced one of the steepest earnings-revision paths on record.

Stronger fundamentals have come with cheaper multiples: earnings rose while valuations compressed. After July's selloff, the S&P Information Technology sector trades near 22x forward earnings, around its 1-year low and below its 10-year average of 23x. That matters for how we hold the book: the part of the market that looked most stretched a month ago is the part that just re-rated cheaper, even as its earnings power grew. Fundamentals, not flows, are back in control, and they favor the names we own rather than warning us off them.

The calendar is turning supportive too. The market has cleared the heaviest part of the summer catalyst calendar, and while roughly 40% of the S&P 500 by market value has yet to report, including many semiconductor companies, results so far have been exceptionally strong. One of July's largest flow headwinds is also set to reverse: we estimate only about 45% of the index by weight can currently buy back stock, a figure that should rise toward 75% by the end of next week and nearly 85% by mid-August as earnings blackout windows expire. Corporate demand is reaccelerating just as positioning has cleaned up, one of the most supportive supply-demand setups since early summer. August is also typically one of the busiest months of the year for buyback execution.

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Inflation: easing in the data, anchored on the Fed's gauge

Headline CPI, the number most clients watch, is easing: 3.73% in June, with the Cleveland nowcast at 3.42% in July and 3.39% in August. For policy, the anchor is core PCE, which eased to 3.29% in June and tracks near 3.31% and 3.36% in the July and August nowcasts.

Core PCE above 3% is still well clear of the 2% target, which is why better prints have not bought rate cuts. The path is disinflationary but far from settled, with energy the swing factor.

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Financial conditions and the Fed: easy conditions, a firmer path

This is where the month's action lived. Broad conditions stayed easy: the Chicago NFCI near -0.55, St. Louis stress near -0.83, no sign of strain. But the priced Fed path firmed to roughly 1.9 hikes through December 2027, up from about 1.5, as sticky core inflation pushed cuts further out.

Easy conditions and a firmer priced path make a constructive combination, but that path lifts the discount rate on the longest-duration, highest-multiple growth. That is the pressure the leaders felt in July, and the macro reason the durability question is worth asking at all.

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Geopolitics: energy risk turning the wrong way

Energy is the live channel. Strait of Hormuz traffic sits below normal, around 11 ships on a 7-day average, and prediction-market odds of year-end normalization are only just above even.

It is a monitored risk, not a driver. But the direction is unhelpful: a renewed oil spike is the most direct threat to the disinflation trail the constructive view relies on.

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The Savvy Macro Dashboard

Summary

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Data

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Question of the Month

"July's semiconductor selloff rattled a lot of people. How do you read it, and did it hurt the book?"

The selloff was concentrated, not systemic. Semiconductors and the tech-heavy indexes fell while the equal-weight S&P held up, and energy, financials, and real estate led. Korea and Taiwan, the most semiconductor-exposed markets, took the brunt, and the broad market did not follow them down. That is the signature of a rotation, not risk-off: leadership repricing, not the cycle turning. It also did most of its damage to valuations rather than fundamentals. Technology now trades near a 1-year valuation low even as second-quarter earnings come in well above expectations, so the selloff arguably improved the setup for the part of the book people were most worried about. It did not hurt us the way a concentrated bet would have, because our equal-weight exposure sat in what led. We did not touch the book. Had this been a genuine growth scare, with spreads widening and conditions tightening, we would be having a different conversation. Instead, conditions stayed easy and stress stayed low, which is not a backdrop you de-risk into.

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Savvy Total Portfolios: Tactical Asset Allocation Positioning

No changes to positioning this month.

Asset Class Views

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Sector Views

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Risks We’re Watching

1. AI monetization disappoints, or concentration bites (elevated).

‍AI demand could turn price-sensitive: falling token and compute pricing, or a hyperscaler capex pullback, sharpened by China open-sourcing frontier models. That would undercut mega-cap Technology earnings just when the index-level equity risk premium (around 0.06pp) is negligible. July's valuation re-rating cushions this risk but does not remove it, and it is the risk the broadening we are weighing would soften.

2. Financial conditions tighten meaningfully (partly materializing).

‍The priced Fed path already firmed to roughly 1.9 hikes through 2027. Credit-spread widening or a rise in the St. Louis stress index (around -0.83) would warrant a more defensive posture.

3. Growth rolls over.

‍A roll in both GDPNow and the Weekly Economic Index, or deteriorating labor and earnings revisions, would challenge the constructive call and favor cutting cyclical equity broadly rather than rotating within it.

4. Neutral rates are structurally higher than expected.

‍Persistent growth despite restrictive policy could reset long-run equilibrium rates higher, pressuring both equity multiples and bond prices.

5. Geopolitical and energy headline risk (deteriorating).

‍Hormuz traffic fell and normalization odds slipped. Energy remains the transmission channel to inflation and financial conditions, and a renewed spike would pressure the disinflation trail.

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Closing Thoughts

The through-line into late summer is simple: fundamentals are back in control, and they are strong. Earnings are beating high expectations, July's selloff cheapened the leaders rather than breaking them, and a reversing buyback blackout meets cleaner positioning to give the market its firmest supply-demand setup since early summer. We stay overweight equities and spread the book beyond the mega-caps, so it does not live or die on any single trade. From here we are watching whether the broad index's thin risk premium starts to bite, which would tip us further toward breadth, and whether energy reignites the inflation path. Neither would change the constructive call, only how we express it: an implementation change, not a view change.