Climbing the Wall of Worry
LOOKING BEYOND THE HEADLINES: THE MARKET’S RESILIENCE
Despite ongoing concerns about interest rates, inflation, tariffs, and the U.S. involvement in the Middle East, U.S. stocks have continued to perform well. Investors often refer to this phenomenon as the market “climbing the wall of worry” by advancing despite unsettling news headlines. In lieu of the persistent uncertainty, the market has continued to climb. This exists for a few reasons, the market outperforming low expectations and investors are looking towards the future and not current circumstances. Skepticism in the market can be a building block of a bull market because of the low expectations and subsequent outperformance. (Schulze, 2026)
If someone asked you to estimate the S&P 500’s year-to-date growth based solely off the headlines in the news, what would your answer be? Many investors would guess that the market struggled, but the S&P 500 has gained approximately 9.20% YTD. News headlines tend to incite uncertainty and fear of the economy in the consumer and affect our daily habits. Effective investing, however, relies on forecasting and looking beyond the daily news and into the future. Volatility in oil prices, AI monetization concerns, and semiconductor shortages are all realities and warrant attention. Even so, a foundationally strong economy is supported by strong corporate earnings, resilient growth, business investment, and increased market participation propelling the economy through the geopolitical tension and high energy prices (Corkery, 2026).
Another key area investors are watching is monetary policy. Geopolitical news overshadowed Kevin Warsh’s first Federal Reserve meeting as the Chairman. The successor to Jerome Powell brought an updated plan on how they would handle monetary policy changes in the future. Instead of using detailed forecasts and forward guidance to generate their policies, Warsh prefers to let the markets freely respond to the economic developments as they occur (Corkery, 2026). This is not to say they will not take hard data into consideration, but that they are more willing to allow productivity to drive economic growth. This is because Warsh believes economic expansion and price stability can be duly supported by productivity.
WHAT’S AHEAD IN THE MARKETS?
In the Fed meeting on July 29th, the target rate remained the same at 3.5% to 3.75% in a 9 to 3 vote. Even with annual inflation at 3.50%, 1.5% above the Fed’s target, they remain true to their ideals of letting the market and economy self-correct. With rates unchanged for the entirety of 2026, the Fed has made their stance clear, and investors look ahead to mid-September when they meet again.
Our investment strategy is built to remain steady during these times of emotional unease and uncertainty. Rather than making investment decisions based on daily headlines, we follow a disciplined process that evaluates longer-term trends and looks to remain aligned with each client’s goals. Having a clear enter and exit strategy allows us to stay steady and remain focused on long-term growth.
TACTICAL ASSET ROTATION STRATEGY (TARS) RESULTS
THE CORE STRATEGY
The Core ETF Strategy is comprised of 3 of the following 6 asset classes: U.S. Stocks, International Stocks, Real Estate Stocks, Gold, US Bonds and Cash (1-3 mo Treasuries). They are evaluated on a relative strength basis and re-ranked 1 through 6 each month. Clients are in the top 3. Typically, the CORE makes up 30% of a client portfolio. The Core TARS portfolio is designed to share in some of the bull market’s gains, while minimizing (or even preventing) losses during bear markets. “Win by not losing.”
TARS Core stayed relatively still in July, with an overall + 0.29% return for Conservative through Moderate portfolios and – 0.70% for Moderate Aggressive and Aggressive. The poor performer in July was IWO. Our first month in IWO gave us a + 3.59% return, while July brought it down – 5.91% for a total return over two months of – 2.32%.
This is signaling a change from our small cap growth fund (IWO) to large cap value (VONV). When the markets shift, then so do we, and our analysis currently shows a movement from growth funds into value. The most likely shift of investor sentiment from growth stocks is the current valuation of technology, further affected by the capital investment into AI.
In our new allocation within the Core Strategy, if US Equities (SPY) is part of the mix, then we further evaluate the US stock market for which segment is performing best. This will result in a 50/50 split in some portfolios of SPY and VONV, with 100% VONV in others.
Real Estate (USRT) replaced gold last month and became the top performer for July’s Core, posting a healthy + 2.17%.
Here was the performance of the Core ETFs for July2
US Stocks (SPY) + 0.03%
Small Cap Growth (IWO)** - 5.91%
International (EFA) + 1.64%
Real Estate (USRT) + 2.17%
*Conservative, Moderate Conservative & Moderate allocations hold 50% SPY and 50% IWO.
**Moderate Aggressive & Aggressive allocations hold 0% SPY and 100% IWO.
There is one change for August. Sell IWO (Small Cap Growth) and Buy VONV (Russell 1000 Value).
SECTOR ETFS
The TARS Sectors that are chosen based upon the same momentum strategy as the Core ETFs. We evaluate 85 Sectors and we make changes if they fall out of the top quartile.
Biotechnology and sector funds as a whole have remained volatile amid geopolitical events. While XBI did not have a positive month, it still ranks among the top of sector funds and therefore does not warrant a change.
Here is the performance of the Sector ETFs for July2
Biotechnology (XBI) - 7.10%
*Moderate, Moderate Aggressive and Aggressive allocations hold XBI
There are no changes for August.
WORLD ETFS
We evaluate 64 country and world ETFs. Aggressive portfolios hold a 5% allocation to 2 country ETFs and Moderate Aggressive have a 2.5% allocation each.
World funds posted a combined – 4.79 % for the month of July. Even with this down month, World funds are + 9.84% YTD, showing why we only hold them in Moderate Aggressive and Aggressive portfolios. Both funds are still in the top quartile and do not warrant a change.
Here is the performance of the World ETFs for July2
Austria (EWO) + 0.37%
Emerging Market ex-China (EMXC) - 9.95%
There are no changes for August.
OTHER FUNDS
VYM posted another positive month, up +13.67% YTD. PFSLX was negative for the month at – 8.45%. Select is a fairly concentrated small-mid cap fund with a value tilt. This down month for PFSLX did not discourage the overall returns for these funds YTD, staying strong at + 13.55%.
Here is the performance of these funds for July2
Vanguard High Dividend Yield Stock Fund (VYM)* - 2.41%
Paradigm Select Fund (PFSLX)** - 8.45%
*Conservative, Moderate Conservative, Moderate & Moderate Aggressive allocations hold VYM.
** Moderate Aggressive & Aggressive allocations hold PFSLX.
There are no changes for August.
FIXED INCOME ETFS
PAAA (PGIM’s AAA Ultra Short Bond Fund) makes 20% of Conservative allocations, 10% of Moderate Conservative and Moderate allocation, and 5% of Moderate Aggressive allocations. It has a current yield of 5.33%. FLOT floating rate has a 10% weighting in Conservative allocation. The PIMCO Income Fund (PIMIX) makes up 10% of all but the Aggressive Growth allocations.
For Moderate Conservative and Moderate allocations, FLOT has been swapped out for the Guggenheim Macro Opportunities Fund (GIOIX). For those in non-retirement accounts where we are seeking to limit taxable income, we have substituted the Short-term Nat’l Muni (SUB), North Square Tax-Advantaged Professional Income (QTPI), and PGIM Ultra Short Muni (PUSH).
Here is the performance of the fixed income funds in July2
PGIM AAA Ultra Short Bond (PAAA) + 0.42%
PGIM Short Term Muni (PUSH) + 0.04%
Short-term Nat’l Muni (SUB) - 0.28%
Invesco Floating Rate (FLOT) + 0.34%
Guggenheim Macro Opportunities (GIOIX) + 0.23%
PIMCO Income (PIMIX) - 1.12%
North Square Tax-Advantage Income (QTPI) - 0.22%
There are no changes for August.
ALTERNATIVE HOLDINGS
The JP Morgan Equity Premium fund (JEPI), writes covered calls on S&P 500 holdings for additional premium returns yields 8.45%. Real Asset Allocation (RAA) is a diversified asset allocation fund that utilizes the same relative strength strategy as our Core Strategy with the inclusion of not just stocks, bonds, and gold, but commodities, metal miners, managed futures, Bitcoin, TIPS, Emerging Market Bonds, and more. RAA is currently 10-20% of every risk strategy. It has been a solid holding up 7.71% YTD with less downside risk than the S&P 500 that is up 9.20%. The S&P 500 down – 0.63% for the month, while RAA is down – 0.18% shows its hedge against downside risk.
Oberweis Micro-Cap goes all the way down the company size spectrum to invest roughly two-thirds of its portfolio in “micro-caps,” the smallest of the publicly traded companies. (Another third is primarily invested in merely “small” companies.) As discussed last month, Micro-caps can be volatile, but when they work, they can add value. Longer-term returns for this fund outpace the index over all longer-term timeframes out to 20 years and is our reason for not making a change.
Here is the performance of the alternative funds in July2
Real Asset Allocation (RAA)* - 0.18%
JP Morgan Equity Premium (JEPI)** + 8.11%
Oberweis Micro-Cap (OBMCX)*** - 12.90%
*All portfolio allocations hold RAA
**All portfolio allocations except for Aggressive hold JEPI
***Aggressive Growth allocations hold obmcx
There are no changes for August.
Kyler Reinhold. AAMS
Wealth Advisor
REFERENCES
1. Towne Trust Market Commentary, July 3, 2026
2. Morningstar July 31, 2026 Monthly Returns.
3. Franklin Templeton – The Long View: Climbing the wall, April 7, 2026
DISCLOSURES
The analysis and commentary in this Market Commentary is general in nature and does not take your personal circumstances into consideration. It is not intended to be a substitute for specific, individualized financial advice and investors should obtain legal, accounting and tax advice from a qualified tax professional, accountant or attorney.
The information provided in this Market Commentary, including any strategies, methodologies, and opinions, is expressed as of the date hereof and is subject to change. EverSource Wealth Advisors, LLC assumes no obligation to update or otherwise revise these materials.
This Market Commentary relies upon historical data, and much of the information presented is not intended to be performance reporting or representation, whether hypothetical or actual. Reports on the performance of various strategies are gross, not net, and do not take into account our fee or various third-party charges such as trading charges. Individual Exchange Traded Fund (ETF) performance in the commentary are monthly returns of all ETFs utilized across client accounts in various asset allocation percentages based upon risk tolerance. They are gross returns and not net of advisory fees. Each client’s returns will vary based upon the percentage of each ETF held, in addition to other variables, such as: allocations to money market funds, additional individual stocks or mutual funds held, and date of entry into each holding.
Actual results will vary from the analysis. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, expressed or implied is made regarding future performance or the accuracy of the information herein.
This material is provided for informational purposes, is intended for your use only, does not constitute an invitation, solicitation, or offer to subscribe for or purchase any of the products or services mentioned. It is likewise not a recommendation that you purchase, sell, or hold any security or other investment or pursue any investment style or strategy.