INVESTMENT MANAGEMENT

A Remarkable Run

Through June 30, 2026, the S&P 500 returned 22.3% over the trailing twelve months, 13.4% annualized over five years, and 15.5% annualized over ten.

Plot every rolling four-year performance run for the index since 1928 and the current stretch sits well into the top decile of all historical outcomes. The market is performing near the outer edge of what it has ever done over that span.

The second quarter of 2026 captured the whole experience in miniature. It opened with active conflict in Iran, the Strait of Hormuz effectively closed, and Brent crude above $120. It closed as the strongest quarter since 2020, with the index setting its twenty-fourth record of the year. The drawdown around the conflict reached roughly 9%, and the market recovered it in eleven days. Very few people predicted any part of that sequence.

The Case That This Keeps Going

The rest of this article will sound cautious, so we should say plainly that we are not suggesting anyone get out.

There is no reliable mechanism that turns a good run into a bad one. Markets do not owe anyone a reversion simply because the recent past has been generous. And on the specific question of valuation, the popular comparison to the dot-com era does not hold up as neatly as the headlines suggest.

At quarter end, the S&P 500 traded at roughly 20 to 22 times forward earnings, elevated against a long-run average nearer 16 but well below the level that accompanied the technology peak in 2000. The gap widens at the company level. Heading into the dot-com unwind, Cisco carried a price-to-earnings multiple around 130 and Oracle around 120. Microsoft, one of the few survivors of that list, traded near 60 times earnings then and trades at less than half that today. The largest companies in this market are, by a wide margin, the most profitable companies in the world, and they are priced accordingly rather than speculatively.

The spending is real as well. Consensus estimates show capital moving off hyperscaler balance sheets and into the semiconductor and hardware ecosystem through 2028. Companies with enormous cash flows are buying physical infrastructure from other companies with enormous cash flows, which bears little resemblance to the eyeballs and page views of 1999.

The index has already adapted around it. Semiconductors represented more than 18% of the S&P 500 at mid-year, up from under 5% in 2020. That shift happened inside the index. Investors who did nothing at all already own it.

So we are making a narrow point rather than a bullish one: anyone who tells you with confidence that this ends soon is guessing, and it could run considerably longer.

What a Long Run Does to a Portfolio

Where the market goes next concerns us less than what a long run does to a portfolio along the way.

Sustained success changes a portfolio without anyone choosing to change it. A family that set a 60% equity target a decade ago and never touched it may be sitting at 75% today. Nobody made that decision. The market made it for them, one good quarter at a time, and the result is a materially different risk posture than the one they signed up for.

The same drift is visible in aggregate. As of mid-2026, equities held directly and indirectly accounted for roughly 36% of total household net worth, the highest share in a series going back to the 1950s and above both the 2000 and 2007 peaks. Households have never had more of their financial lives tied to the direction of the stock market. And because market leadership is so concentrated, that exposure is unusually sensitive to the fortunes of a narrow group of companies.

Three habits tend to form during long expansions.

The first is that recoveries start to feel automatic. Declines have rebounded quickly in recent years, helped by ample liquidity and accommodative policy. The 2026 Iran drawdown took eleven days to recover. But the two deepest declines in the modern record, the dot-com unwind and the global financial crisis, each took years to reclaim their highs. A long run of fast recoveries tells you nothing about the speed of the next one.

The second is that borrowing feels costless. Margin used to defer a capital gain is a perfectly rational tool, right up until the collateral falls and the loan does not. The risk lies less in the borrowing than in borrowing without a defined repayment plan, which converts a tax decision into a leverage decision.

The third is that diversification starts to feel like a tax. When U.S. large-cap equities are compounding at better than 15%, everything else in the portfolio looks like dead weight. Consider what happened in the eighteen months through June 2026: emerging markets outpaced U.S. stocks by roughly 30% cumulatively, and three chipmakers accounted for nearly all of that lead. A globally diversified investor owned TSMC, Samsung, and SK Hynix before anyone was writing about them. That is diversification working, not failing.

Three Things Worth Doing Now

None of this argues for a market call. The point is to confirm that the portfolio still matches the plan.

1. If you are carrying margin to defer taxes, define the exit.

Borrowing against appreciated positions to fund spending or new investments is a legitimate strategy, and deferring a large capital gain has real value. But the strategy needs a second half. If the balance has grown without a specific repayment source and timeline, this is a reasonable moment to consider realizing some gains and paying it down. Reducing leverage into strength is a good deal more pleasant than reducing it into weakness.

2. Fund the next twelve to twenty-four months in cash.

Map the known obligations across both the personal and business balance sheets: tax payments, capital calls, tuition, construction draws, planned gifts, business investment. Then make sure that money is sitting in cash and short-term instruments rather than in the market.

Funding near-term needs is what makes discipline possible. The investor who must raise cash during a downturn converts a temporary decline into a permanent loss. The investor whose obligations are already covered can simply wait and can even go shopping. Liquidity is the foundation of patience.

3. Rebalance back to the allocation you chose.

If equities have swelled well beyond target, trimming back is not market timing. It is maintenance. You set that target for reasons that have not changed, and drifting away from it is a decision by default rather than by design.

And mind the taxes without being governed by them. Charitable gifts of appreciated stock and harvesting losses where they exist both reduce the cost of getting back to target. So does sequencing sales across tax years, which keeps one large gain from landing entirely in a single return. A good tax plan makes rebalancing cheaper. It should not make rebalancing impossible.

This Is What the Cycle Looks Like From the Inside

Other capital expenditure booms in history have followed a similar arc. Optimism justified by real earnings, capital flooding toward the opportunity, infrastructure getting built, and then returns on that infrastructure sorting themselves out unevenly, producing a smaller set of durable winners than the enthusiasm implied.

The railroads transformed the American economy, and most railroad investors did poorly. Fiber optic capacity built in the late 1990s underpins the internet we use today, and the companies that laid it largely did not survive to see it. We have no particular insight into which of today’s AI infrastructure investments will earn their cost of capital. We are reasonably confident that not all of them will.

The historical record on leadership is unambiguous. Looking at the world’s ten largest companies by market capitalization at each decade mark since 1980, at least seven of the ten fell off the list by the next observation. Microsoft is the rare repeater. Cap-weighted indexing captures that rotation automatically, carrying investors from oil to Japan to dot-com to AI without requiring anyone to forecast the handoff. But it only works if you own the whole thing, and if you stay in your seat long enough for the rotation to happen.

A Final Thought

Discipline cuts both ways, and the second direction gets much less attention than the first.

We spend a great deal of energy preparing families to hold their positions through a decline. We spend less time on the discipline required after a spectacular run, when the temptation is to conclude that the rules have changed and that the allocation which produced these returns should be left alone to keep producing them.

The strategy that keeps an investor in the market through a March war scare is the same strategy that keeps them from chasing after a record quarter. In both cases it is the allocation that is right for the long term.

Things are going well, and that is worth appreciating. It is also the easiest moment there is to let a portfolio drift away from the plan behind it.

This article is for informational purposes only and does not constitute investment, tax, or legal advice. Past performance is not indicative of future results. Please consult your ArchBridge advisor or other qualified professional before making financial decisions.

ArchBridge Family Office is an independent, multi-family office and trust company that advises clients on more than $15 billion of investment assets and more than $18 billion of total wealth. Founded in 2002, ArchBridge provides holistic, high-touch client service including customized, independent investment management and a full range of family office and fiduciary services.