Investment Insights

As we enter the second half of 2026, markets have shown remarkable resiliency in the face of unforeseen events. The Middle East war which began in the 1Q26 as given way to an uneasy truce, followed by a resumption of hostilities, with little clarity about how and when the peace will be restored. Despite a massive rise in oil prices and a fundamental rethinking of the Fed’s most likely path, markets have remained mostly positive thus far for the year.

During 2Q26, the total return for the S&P 500 was 10.2%. Global equities also rose with the MSCI World up 11.3%. The tech-heavy Nasdaq rebounded after being the laggard in 1Q26, posting a 21.6% total return in 2Q26 after falling by -7.0% in 1Q26. Looking at other indicators for the second quarter, gold declined (XAU, -15.8%) while US dollar index (DXY) (+1.5%) rose. The benchmark 10-year US Treasury yield (UST10) rose during the first quarter, starting at 4.32% and ending at 4.47 % (up +25 bps).

Equity markets were strongly positive in the second quarter, as they regained their footing despite the ongoing war in the Middle East. After a brief ceasefire agreement, the Strait of Hormuz blockade was reimposed. We remain hopeful that a deal can be struck between all parties, as it would seem to be in all parties interest to resume global oil flows. Still, oil has remains higher as peace is elusive and strategic reserves have been depleted.

As we noted in our prior newsletter, the consequence of higher oil prices is likely to delay the path back to the Fed’s 2.0% inflation target. Indeed, Fed funds futures are now pricing in a rate hike as the next move, after pricing in two -25 bps cuts at beginning of 2026. We note that the new Fed Chair Warsh has discontinued “forward guidance,” meaning that every FOMC meeting should be considered to be “live” for rate changes. As well, he appointed various task forces that are going to examine the Fed’s monetary policy tools, research, and communication. The U.S. labor market has stayed resilient, and overall GDP growth has steadied after weakness in late 2025. GDPNow is estimated at 1.7% for 2Q26, after posting a solid 2.1% for 1Q26.

Our call for clients to stay invested despite first quarter volatility was rewarded, with one of the best quarters on record for U.S. and global equities as tech leadership resumed. SpaceX went public, and the investment in AI continues apace. Now, we are becoming more cautious as first-half 2026 equity returns are better than the long-term average for annual returns, after three strongly positive years. We reiterate our view that well-diversified equity portfolios should demonstrate long-term positive performance in tandem with global growth. We also look for markets to broaden beyond the heavily concentrated leadership in tech, although we acknowledge that technology tends to have better growth prospects than any other sector. We also believe that fixed income exposure provides steady income and less volatility, even if bonds have less capital appreciation potential than in recent years, given persistent inflation.

Following the conclusion of the quarter, our Investment Committee has made some changes to both allocations and underlying funds. For equities, we maintain our quality focus with allocations to U.S. core and large cap, complemented by international, small/mid-cap, and emerging markets equities. However, we reduce the portfolio overweight allocation to international equities and increase exposure to U.S. equities, resulting in positioning that more closely aligns with current market views. We also change the underlying fund to a passive international equity index ETF, following recent underperformance of the fund and a shift in its investment approach. Given the limited availability of compelling active managers within the asset class, passive exposure is considered the more attractive alternative, especially as it achieves similar exposure at a lower cost. For the Income portfolio, we shift to a core U.S. equity allocation, again through a passive vehicle and at a lower cost. For the Income & Growth and Growth portfolios, equity exposure will continue to follow a barbell approach, balancing value-oriented and growth-oriented strategies. This positioning maintains diversified exposure across investment styles.

Fixed income allocations remain mostly unchanged. The only adjustment is a modest increase to Agg, in order to add duration while slightly reducing exposure to securitized assets. Separately, we maintained our allocation to “real assets,” which was initiated in late 2025, with the goal of acting as a diversifier to the portfolios over time.

Amerant has continued its partnership with global investment management firm BNY Mellon on the advisory portfolios, and any changes in the portfolios that are approved by the Investment Committee will be implemented at our discretion. We will continue to communicate any future changes to the portfolios to clients going forward.

In the table below, we update our Amerant Market Views, which represent our investment team’s most recent views based on investment valuations and macro trends. As a reminder, these are not client-specific recommendations, and clients should always consider their long-term financial goals and objectives when determining their asset allocations.

We changed our tactical views slightly in the most recent quarter but remain constructive overall. We maintain our tilt toward growth in equities and carry in fixed income.

This information is being provided for informational and educational purposes only to support our general market commentary. It should NOT be interpreted as investment advice regarding any specific security or investment strategy. See the disclosures at the end of this presentation for additional important information.

Despite war in the Middle East, U.S. markets have been focused on the implications of AI-led investments. Long-term productivity gains are still expected, but the near-term impact is more on capital expenditures to build out AI-capacity. We have become even more cautious that the elevated level of capex for AI build out may prove to be unsustainable, as the ramp up by hyper-scalers accounted for nearly all of their free cash flow in the most recent quarter.

We continue to believe broader participation across industries for market leadership would be healthier, and, in our opinion, equities remain vulnerable to shocks given current valuations. That said, the labor market remains healthy, and, as long as consumers have jobs, consumer spending and capex investment are both supportive of positive U.S. GDP growth.

For fixed income, we see risks as balanced and believe this asset class is best for investors looking for income, rather than capital appreciation. Higher rates have led to lackluster total return through the first half of 2026, but we sense that rates are likely to remain broadly rangebound and look for opportunities to add duration when rates are towards the higher end of the range.

Second Quarter 2026 Returns ⁽¹⁾  

Notes: Asset class performance is in USD and refers to the following indices: Equities: US Large Caps (S&P 500), Emerging Markets (MSCI EM), Europe (MSCI Europe), Japan (MSCI Japan). Fixed Income: 10-Yr. US Treasuries (BofAML US Treasury Current 10-Yr.), Emerging Markets Sovereign (USD) (EMB ETF), Emerging Markets Sovereign (LCL) (LEMB ETF), US High Yield (BofAML US HY Master II), US Investment Grade (BarCap US Aggregate Bond). Source: Morningstar. (1) Strategy returns net of mutual fund expenses and Amerant Investments standard management fees.

On these tables, you can see index and strategy returns for the first and second quarters plus the first half of 2026.

The second quarter of 2026 experienced positive returns across both equities and fixed income, following a negative environment in the first quarter. Through the first half of 2026, returns were positive across all strategies given the positive market in the second quarter. The Income strategies continue to emphasize distribution income, while the Growth portfolios had the highest absolute return. All the funds included in the portfolios are hedged back to the U.S. dollar. As always, we will communicate any changes in our views and positioning going forward.

Asset Allocation Portfolios returns for periods ended June 30^th, 2026 ⁽¹⁾

⁽¹⁾ Returns for period ended June 30, 2026. Returns may vary. Past returns are no indication of future performance. Returns up to February 2020 are based on A shares, which were used on the portfolios up to that month, net of the then standard AMTI 1% management fee. Returns from March 2020 to June 2021 are based on I (or similar) shares, which have no 12b-1 fees, net of a standard AMTI 1.25% management fee. Returns starting July 2021 are based on I (or similar) shares, which have no 12b-1 fees, net of a standard AMTI 1% management fee. Returns are net of fees, and assume reinvestment of dividends, interest, and capital gains.Investing involves risk, including the possible loss of principal.

For the one year through 2Q26, the Income Portfolio returned 6.3%, the Income & Growth Portfolio returned 10.5%, and the Growth Portfolio returned 13.6%.  The longer-term performance figures remain positive across all strategies.

We take the trust you have placed in us very seriously. In our day-to-day operations, we continue to follow current events and the reactions of the markets closely, and we stand ready to adjust your portfolios accordingly.

To obtain more detailed information on our market views or the performance of your advisory portfolio, please contact your investment consultant at Amerant Investments by calling (305) 460-8599.

Sincerely,

Amerant Investments, Inc.

https://www.amerantinvestments.com/