Savvy Portfolio Perspectives | June 2026

Constructive, Not Complacent

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Executive Snapshot

Markets entered May with meaningful support from corporate earnings, but also with renewed pressure from inflation and rising interest rates. Q1 results have continued to come in ahead of expectations, particularly across Technology and AI infrastructure. At the same time, April CPI and PPI pointed to firmer price pressure, pushing Treasury yields higher as investors reassessed the path of Fed policy. FactSet’s May 8 data showed that 84% of reporting S&P 500 companies beat EPS estimates, while Reuters reported that the 10-year Treasury yield climbed to roughly 4.6% by May 15, its highest level since May 2025.

That rates move is significant. A higher 10-year yield raises the hurdle for future equity returns, pressures valuation multiples, and suggests that bond investors may be less willing to look through sticky inflation data. We do not view this as a recession signal. We view it as a reminder that the market’s margin for error narrows when strong earnings are paired with rising rates.

Against that backdrop, we remain constructive, but selective. We continue to favor equities over fixed income, with an emphasis on areas where earnings visibility, balance sheet quality, and market leadership remain strongest. On May 8, we made a modest tactical refinement within equities, moving Healthcare from overweight back to neutral and reallocating the proceeds equally to broad S&P 500 exposure and Technology. This was not a broad positioning shift. It was a reassessment of where active risk is best deployed.

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The Verdict

Markets have spent much of the first half of 2026 navigating a series of competing narratives: 

1. inflation reacceleration 
2. geopolitical conflict in the Middle East
3. rising interest rates
4. concerns about policy uncertainty.

 Yet beneath those headlines, the underlying macro backdrop remains surprisingly constructive.

Our review this month did not result in any tactical asset allocation changes. The core message from our macro framework is straightforward: growth remains above trend and is proving to be resilient, inflation remains elevated but is showing signs of moderation, financial conditions remain supportive, and systemic financial stress remains low.

While markets have repriced toward a more hawkish Federal Reserve path, the economy has continued to absorb higher rates without meaningful deterioration in activity. As a result, we continue to view the current environment as one of ongoing expansion rather than late-cycle contraction.

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Portfolio Stance

We maintain our existing positioning:

• Overweight equities, with a continued preference for U.S. large caps. 
  
  • Sector positioning remains tilted toward technology, industrials, consumer discretionary, and utilities
  • Complemented by equal-weight exposure to broaden participation.
• Underweight fixed income.
  
  • Neutral investment grade and international DM, underweight high yield
• Neutral commodities

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Core Driver

The primary driver of our current view is the combination of resilient economic growth and still-accommodative financial conditions.

Our macro framework currently points toward a "reflation with a Goldilocks bias" environment: growth remains resilient, inflation is no longer accelerating materially, financial conditions remain supportive, and geopolitical disruptions appear less severe than markets feared only a few months ago.

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Macro Thoughts

Growth Continues To Surprise

One of the most notable developments this year has been the resilience of economic activity.

The Weekly Economic Index (WEI), which aggregates high-frequency measures of consumer activity, labor markets, and production, continues to signal above-trend growth. The average reading YTD of about 2.7% has been consistent with real GDP growth running comfortably above historical trend levels. Similarly, the Atlanta Fed's GDPNow model is tracking approximately 3.0% real GDP growth for the current quarter 2Q 2026.

While recession concerns remain a recurring market narrative, current growth data continue to suggest an economy that is expanding rather than contracting.

For investors, this distinction matters. Strong growth supports corporate earnings, sustains business investment, and helps explain why risk assets have remained resilient despite higher interest rates.

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Inflation Remains Elevated But Appears To Be Improving

Inflation remains above the Federal Reserve's long-term target, but the direction of travel appears more encouraging.

Recent Cleveland Fed inflation nowcasts suggest both CPI and Core CPI remain elevated, yet the pace of acceleration has moderated. Energy prices—which were the dominant inflation concern throughout the spring—have begun to ease as geopolitical fears surrounding the Strait of Hormuz have faded.

Importantly, inflation expectations remain broadly anchored. While inflation is still too high for the Fed to declare victory, current evidence does not suggest a return to the inflation shocks experienced in earlier years.

The distinction between "high inflation" and "accelerating inflation" is important. Markets tend to react far more negatively to accelerating inflation than to inflation that is gradually moving in the right direction, or in our case, lower from a high point.

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Financial Conditions Remain Supportive

One of the more underappreciated developments in today's market is the continued ease of financial conditions. 

The Chicago Fed National Financial Conditions Index remains below zero, indicating conditions are still accommodative relative to historical norms. Meanwhile, the St. Louis Fed Financial Stress Index remains well below levels typically associated with systemic stress.

This matters because financial conditions often influence economic activity more directly than the federal funds rate itself. While policy rates remain above most estimates of neutral, credit spreads remain relatively contained, equity markets have been supportive, and access to capital remains broadly available. 

As a result, higher policy rates have not translated into the degree of financial tightening that has historically accompanied recessionary environments.

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A More Hawkish Fed Is Emerging

If there is one meaningful headwind developing beneath the surface, it is the market's reassessment of the future path of Federal Reserve policy.

Throughout recent months, investors have gradually reduced expectations for aggressive rate cuts. Strong economic growth and still-elevated inflation have caused markets to price a more restrictive policy path than previously expected.

We view this as the primary macro risk currently facing markets.

Importantly, this is not yet a risk that has materially altered market behavior. Equities have continued to perform well despite the hawkish repricing. However, sustained economic strength coupled with sticky inflation could eventually pressure both equity valuations and fixed income returns if investors conclude that neutral rates are structurally higher than previously believed.

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Geopolitics Are Becoming Less Important

The dominant macro story of March, April, and May centered on the conflict involving Iran and disruptions through the Strait of Hormuz.

Today, those concerns appear considerably less severe.

Energy markets have stabilized, expectations around shipping activity have improved, and markets increasingly expect continued normalization of energy flows. While geopolitical uncertainty never fully disappears, the economic transmission channels that concerned investors earlier this year—namely oil prices, inflation, and financial conditions—have become less threatening.

As a result, geopolitics has shifted from a primary driver of portfolio positioning to a monitored risk.

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The Savvy Macro Dashboard

Summary

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Data

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Question(s) of the Month

"If growth is strong, why aren't we becoming more aggressive?"

Strong growth is positive for corporate earnings and generally supportive of risk assets. However, portfolio construction is not simply about identifying what is working today—it is about balancing opportunity and risk.

The same growth resilience that supports equities is also contributing to higher interest rates and a more hawkish Federal Reserve outlook. As growth remains strong, the probability of aggressive policy easing declines.

In other words, the current environment remains favorable, but it is not risk-free. Our positioning reflects participation in growth opportunities while remaining mindful of valuation, inflation, and policy risks.

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"Why aren't we more positive on bonds if yields are attractive?"

Yields today are significantly higher than they were several years ago, which improves the income opportunity available in fixed income.

However, bond returns depend on more than yield alone. The strongest environments for duration typically involve slowing growth, falling inflation, easing policy, and tightening financial conditions.

Today, we see the opposite. Growth remains resilient, inflation remains above target, and markets are repricing toward fewer rate cuts.

While bonds can still play an important portfolio role, we believe the burden of proof currently rests with duration-sensitive fixed income rather than equities.

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Savvy Total Portfolios: Tactical Asset Allocation Positioning

Asset Class Views

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Sector Views

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Risks We’re Watching

1. Growth Rolls Over

A material deterioration in growth indicators, labor markets, or earnings revisions would challenge our constructive outlook and likely increase the attractiveness of fixed income.

2. Financial Conditions Tighten Meaningfully

Credit spread widening, deteriorating liquidity conditions, or rising financial stress could pressure risk assets and warrant a more defensive posture.

3. Neutral Interest Rates Are Higher Than Expected

If growth remains persistently strong despite restrictive policy, investors may conclude that long-term equilibrium rates are structurally higher. This would pressure both equity valuations and bond prices.

4. Inflation Reaccelerates

While current evidence points toward moderation, a renewed inflation acceleration would challenge the favorable macro backdrop and likely force a more restrictive policy response.

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Closing Thoughts

The dominant theme entering the summer is not recession, crisis, or economic contraction. It is resilience.

Growth remains stronger than expected. Inflation appears to be moving gradually in the right direction. Financial conditions remain supportive, and systemic stress remains low.

That combination continues to support a constructive view on risk assets.

At the same time, markets are beginning to grapple with a world in which economic strength limits the Federal Reserve's ability to ease policy aggressively. We believe that tension—strong growth alongside a more hawkish policy path—will be one of the defining themes for the second half of 2026.

For now, our approach remains unchanged: stay diversified, remain disciplined, and allow portfolio positioning to be driven by fundamentals rather than headlines.