Read this week's MTI update

Q2-2026 saw Momentum gain a remarkable 44% as investors chased their favorite AI-capex beneficiaries. On the other side of the ledger, Low Volatility gained just 3%, as safety apparently wasn’t anyone’s top priority.

June’s turbulent market highlighted the value of diversification. Core finished essentially flat while outperforming the S&P 500, Select Industries extended its strong year-to-date gains, and Grizzly provided meaningful protection during the early-month selloff. Across the strategies, shifting market breadth and reduced concentration in AI-related holdings remain key themes.

Read this week's update.

Momentum has dominated factor performance in 2026, with Leuthold’s Dream industries dramatically outpacing the Nightmares through mid-year. AI build-out groups have driven most of the gap, reinforcing momentum’s long-term edge while leaving bottom-fishing strategies still waiting for a meaningful rebound.

Select Industries trimmed AI-infrastructure winners, added Semiconductor exposure, and continues to find opportunities among fundamentally strong laggards, while rate-sensitive industries remain under pressure.

With some serious wobbles at the top of the capitalization structure in June, the S&P 500 still managed to post its best quarterly return (+15%) in six years. Even so, that’s small potatoes compared to a few of the Q2 returns among the S&P 500 factor indexes, as Momentum (+44%), High Beta (+34%), and Growth (+22%) shot to the moon.

Royal Blue Growth, our mega-cap proxy, rocketed 26% higher in Q2. The Russell 2000 Growth index turned in an almost identical advance.

Our Ratio of Ratios narrowed with excellent Small Cap performance in June. The S&P 600 gained an impressive 7%, while the average stock in the S&P 500 advanced just 2%. Still, this vignette will need many more months of Small Cap P/E expansion to close the gap with Large Caps.

The Up/Down ratio for the final month of Q1 reads 2.21. Windfall, jackpot, and bonanza are all appropriate words to describe the vignette so far in 2026. This reading, reflecting the number of firms reporting YOY EPS growth, surpasses the two prior contemporary peaks: The corporate tax cut of 2018 and the sharp EPS rebound following the depths of the pandemic. Can we keep this broad earnings-growth story moving even higher with Q2 reports just around the corner?

The massive private-sector stimulus package—AI spending—continues to drive earnings and economic activity. Tighter financial conditions have only begun to nibble at investor confidence. The balance of risk has shifted from growth to inflation over the last few months.

Elevated readings in Citi’s U.S. ESI have lately been regularly accompanied by disappointing market returns. Our study of 27 past instances finds that “good-news-is-bad-news” episodes have tended to be self-correcting. Strong economic surprises eventually become harder to beat, and the ESI rolls over.

The dot-com era was mostly a public-market event, while the AI boom has been largely funded through the balance sheets of hyperscalers and private capital. That distinction is quickly eroding. Once quietly contained on private balance sheets, the risk is now going public.

Read this week's Major Trend.

Micron Technology has been the quintessential boom-bust cyclical over most of its history, tracing out a gross margin path that would put to shame any industrial-age steel or chemical company. However, the trillions of dollars being spent on datacenters have put Micron in the catbird’s seat, generating an 85% gross margin in its most recent quarter.

Growth’s P/E gap between trailing and forward EPS is over 10 points—historically high and challenging the 1999 peak. One’s opinion about Growth depends heavily on whether they are looking backward or forward in their P/E calculations.

The S&P 500’s sharp Q2 rally ended with a whimper, as the index shed 1% in June. Still, since the end of March, the 15% gain translates to the S&P 500’s best quarter since Q2-2020. From here, the index would lose 44% if it moved back to its median level based on data from 1957 forward.

What is the link between these two intellectual giants who essentially pioneered their respective fields? The recent S-1 filing by SpaceX in support of its IPO is our connection between these two world views.

The decision to lever up reflects the convergence of several behavioral finance hot buttons; today’s 54% absolute margin debt growth, and 26% excess margin debt growth over the last 12 months both exceed the historical trigger points.

Several leading AI models were engaged to generate personalized investment advice meant to meet the suitability standards required of professional advisors; their results were underwhelming, and yet, enlightening.