⚡️Market Strategy Flash
June 26, 2026
How can advisors balance the structural tension between protecting and growing their clients’ capital? In our view, the WCG Investment Strategy Committee’s (ISC’s) outlook for a 20% return on the S&P 500 and a positive, single-digit return on the 10-year Treasury is well calibrated for the current climate.
Macro Foundation: “Core” Coolness & Steady State
The overarching theme for the rest of 2026 is: “Equilibrium.” We see a US economy that’s comfortably expanding at a 2% pace — resilient enough to support corporate earnings but not overheating to the point of forcing tighter monetary policy.
With relatively cool “core” inflation alongside 10-year Treasury breakeven inflation rates that are hovering around 2.2%, the Federal Reserve (Fed) has scope to maintain a measured, accommodative posture (see the chart below).
Market-implied inflation expectations remain well anchored
Sources: FRED, WCG, 6/23/26. Notes: Breakeven = 10-year Treasury minus 10-year Treasury Inflation Protected Security (TIPS). An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Risky Business: The primary threat to my “core” coolness thesis is a persistent crude oil supply shock, renewed energy price spikes and ongoing “war-flation.”
However, our base case remains a “steady state” operating environment where underlying inflation behaves, the Fed “does no harm” and investors “keep calm and carry on (see the chart below).”
As we expected, “war-flation” is proving “transitory” after all
Sources: FRED, WCG, 6/23/26. Notes: WTI = West Texas Intermediate. An investment cannot be made directly in an index. Past performance is no guarantee of future results.
Equities (60-80% Allocation): The Path to 8,500
To capture our projected 20% gain on the S&P 500 this year, we emphasize structural fundamentals over speculative momentum.
- Earnings Do the “Heavy Lifting:” Upside should mostly be driven by earnings per share (EPS) growth rather than price-to-earnings (P/E) multiple expansion because equity valuations are historically elevated. Indeed, S&P 500 companies are actively demonstrating robust operating leverage.
The Catalyst:Efficiency gains and a massive, ongoing artificial intelligence (AI) capital expenditure (capex) cycle that’s projected to approach $800 billion among the largest technology players this year alone (see the chart below).
Efficiency gains, cost control and margin expansion boost EPS
Sources: FRED, WCG, 6/23/26. Notes: NBER = National Bureau of Economic Research.
- The “Great Rotation:”Year to date, index performance has been polarized by simultaneous mega- and small market capitalization outperformance.
What’s Next: Peace in the Middle East alongside a stable interest rate and economic landscape should support a broader stock market, including a catchup phase for mid caps and smaller large caps.
Fixed Income (20-40% Allocation): Fair Value & Portfolio Protection
Once again, we think the bond market has a traditional role to play. With 10-year Treasury yields currently sitting in the middle of their valuation band (4.5%), our forecast for a positive single-digit return potentially provides the growth and income necessary to offset equity volatility:
- A “Normal” Yield Curve:While there has been near-term pressure on shorter-dated Treasury yields, the difference between 10- and 2-Year Treasury yields — or the “slope” of the curve — remains relatively “normal” at 0.3%. Moreover, the upward pressure on the short end of the curve has largely been because of the geopolitical impact on the price of oil and headline inflation volatility.
Despite recent flattening, the yield curve remains positive
Sources:FRED, WCG, 6/23/26.Notes: An investment cannot be made directly in an index. Past performance is no guarantee of future results.
- Fed Focus:We encourage the inflation “hawks” at the Fed to look through the “headline” heat and interpret “war-flation” as temporary. In my humble opinion, “exogenous” supply-side shocks question the need for the Fed to raise the federal funds rate at this juncture.
- A “Buoyant” 10-Year:Insofar as the recent positive correlation between West Texas Intermediate (WTI) crude oil prices and Treasury yields holds, a fairly valued 10-year Treasury, a US economy that’s NOT overheating and peace in the Middle East present solid arguments for slightly softer yields, perhaps toward their -1 standard error of 3.6%. That said, US government bonds can’t rally too much because the economy seems to be doing just fine.
Bottom Line
In our view, a 60-80% equity / 20-40% fixed-income allocation is an ideal range for the current climate. Specifically, an equity skew captures the structural growth of a booming, yet not-overheating corporate sector, and a decent fixed-income allotment capitalizes on fair value plus relatively cool “core” inflation to anchor the portfolio. In short, it’s a strategy grounded in earnings and economic realities, not fears.
Definitions
S&P 500: A stock market index that tracks the performance of 500 of the largest companies listed on stock exchanges in the United States. It is widely used as a reliable gauge for the overall health of the US stock market.
10-Year Treasury: A US government debt bond that matures in 10 years, serving as a critical benchmark for global interest rates. Its yield influences borrowing costs for home mortgages, car loans, and business financing.
Breakeven Inflation Rate: Market-implied inflation expectations derived from 10-year Treasuries and TIPS. Breakevens imply what the market expects inflation to average over the next decade.
Fed: The central banking system of the United States. Its main jobs are to control the nation’s money supply, manage interest rates, and keep the financial system stable.
WTI Crude Oil: West Texas Intermediate is a high-quality, light, and sweet crude oil extracted primarily from fields in Texas. It serves as one of the major global pricing benchmarks for buying and selling oil.
US Regular All Formulations Retail Gasoline: The national average pump price for standard, regular-grade gasoline across all regional blending types. This metric tracks what everyday drivers pay at the pump across the country.
EPS: Earnings Per Share measures a company’s total net profit divided by the number of its outstanding shares. This number tells you exactly how much profit a company makes for each share of its stock.
P/E: The Price-to-Earnings ratio is a financial metric calculated by dividing a company’s current stock price by its earnings per share. Investors use this number to determine if a stock is overvalued or undervalued relative to its profits.
AI: Artificial Intelligence is a branch of computer science that builds software and systems capable of performing tasks that usually require human intelligence. These tasks include learning from data, recognizing speech, solving problems, and making decisions.
CapEx: Capital expenditure represents the money a company spends to buy, maintain, or upgrade physical assets such as buildings, technology, or equipment. These investments are made to grow the business over the long term.
Nonfarm Business Productivity: An economic measure that tracks the hourly output of goods and services produced by American workers, excluding the farming sector. It highlights how efficiently the workforce is operating over time.
Nonfarm Business Unit Labor Costs: The average amount of money a business pays its workers to produce one single unit of output, excluding agricultural workers. This metric helps economists track inflation pressures stemming from worker wages.
NBER: The National Bureau of Economic Research is a private, nonprofit research organization in the United States. It is famously responsible for officially tracking and declaring when the US economy enters and exits a recession.
Standard Error: A statistical term that measures how much a sample statistic is expected to differ from the actual population value. A smaller standard error means your sample data provides a more accurate estimate of the truth.
Disclosures
The views expressed are for informational and educational purposes only and are subject to change without notice.
This material is not intended as, and should not be interpreted as, individualized investment advice or a recommendation to buy, sell, or hold any security, sector, industry, or investment strategy.
References to specific companies, securities, sectors, or industries are for illustrative purposes only and should not be construed as investment recommendations.
Investing involves risk, including the possible loss of principal. Investments in a specific industry or sector may involve greater risk and volatility than more diversified investments.
Past performance is not indicative of future results. No investment strategy can guarantee a profit or protect against loss.
Forward-looking statements, including views about future demand, pricing, supply, or industry cycles, are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially.
Data and information are believed to be reliable, but accuracy, completeness, and timeliness are not guaranteed. Source documents should be retained for factual claims, third-party research references, and company-specific data.
Portfolio holdings, allocations, and risk budgets are subject to change based on market conditions, client objectives, and investment guidelines.
The author, firm, clients, or related persons may hold positions in securities mentioned and may buy or sell those securities without notice, subject to applicable policies and regulations.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through WCG Wealth Advisors, LLC, an SEC Registered Investment Advisor. WCG Wealth Advisors, LLC and The Wealth Consulting Group are separate entities from LPL Financial. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results.
All information in this report is believed to be from reliable sources; however, WCG Wealth Advisors, LLC, makes no representation as to its completeness or accuracy.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the companies as well as broad market, economic and political conditions. Stock investing involves risks, including fluctuating prices and loss of principal. Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time. (135-LPL) International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets. (93-LPL)
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Bonds are subject to availability, change in price, call features and credit risk. (116-LPL)
The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors. (122-LPL)
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. (28-LPL)
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. (26-LPL)
Standard deviation is a historical measure of the variability of returns relative to the average annual return. If a portfolio has a high standard deviation, its returns have been volatile. A low standard deviation indicates returns have been less volatile. (131-LPL)
This is for educational / general purposes only, does not constitute investment, tax or legal advice and should not be relied on as such. This is not to be construed as an offer to buy or sell any financial instruments. Any strategies discussed are not intended to be relied upon as the sole factor in making an investment decision for any individual. As with all investments there are associated inherent risks. Please obtain and review all financial material carefully before investing. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. These comments should not be construed as recommendations but as an illustration of broader themes.
Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations. In addition, forward-looking statements, including index targets or market scenarios, are hypothetical in nature, reflect current views and assumptions and are subject to change based on market and economic conditions and are not guarantees of future performance. This is a hypothetical example and is not representative of any specific investment. Your results may vary. (88-LPL) Scenario outcomes are illustrative and not predictive. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. Indexes are unmanaged and cannot be invested in directly. (102-LPL)
Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
Publication Date: June 26, 2026
For Public Use in the US
The Wealth Consulting Group
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