Summer 2026
—William H. Darling, Chairman & CEO
Recent heavy stock market trading volume has helped fuel earnings at large US banks. “Executives and analysts say that institutional clients are now constantly repositioning their portfolios, reacting to major geopolitical events and dramatic market volatility, seeking to cash in on big gains and protect themselves from a potential drop.”[1] As the title of a recent WSJ article says (“Wall Street Traders Enjoying Their Best Year Ever”), this is the very definition of trading, as opposed to investing. It is, though, just the internal workings of the market.
One of the factors driving major geopolitical events is trade imbalances. For the US, the current administration’s efforts to correct what they view as decades of mistakes in setting US trade policy have been a factor, but probably not as large a negative factor for the US economy as predicted at the start of the tariff-imposition process. The Europeans have now begun to realize that they need to push back against mercantilist China. The latest domestic problems in China mean that “absent any other convenient alternative, the Chinese aspire to export their excess domestic capacity rather than risking a debt-deflation spiral at home.”[2]
The Chinese response to this concern is probably best illustrated by a Chinese commentator’s rebuke of European trade negotiators’ efforts to rein in the flood of exports from China during the recent heat wave across Europe: “If China stops selling air conditioners, will European gentlemen still be so passionate about ‘over-capacity’?” Pretty close to “let them eat cake.”[3]
Trade imbalances in goods are only one half of the double-entry bookkeeping required to analyze imbalances; the other side is currency, the payment for the goods. A devalued domestic currency helps sell a country’s goods and an overvalued currency is a headwind to selling goods abroad. International negotiators like to use currency values to influence the trade in goods.
What would be good news to international negotiators? “A plunge in US stocks driven, for example, by disappointment in artificial intelligence (AI) would effectively write down the IOUs the US issued to foreigners to finance its deficits” (partly financed by US stock sales to foreigners).[4] “It could also lower the dollar, further correcting those deficits.”[5] This seems to be a particularly one-sided solution, but US investors should probably be ready for it, if other initiatives don’t succeed.
Possible Initiatives
What are some of those other initiatives or perspectives? I’ll preface this list with an appropriate Wall Street saying about optimists in the stock market: “With feet firmly planted in midair, I remain a chicken-bull.” Investment managers at Woodstock have recited this list of possible initiatives.
- Reshoring is the domestic effect of tariffs succeeding in making foreign produced goods more expensive, thereby boosting domestic production. This could have a dramatic effect over the next three to four years.
- AI has the potential to destroy all moats, thereby commoditizing everything and lowering prices.
- If the US economy pivots pro-cyclically, then those stocks of companies that have been out of favor and have done much cost-cutting will be beneficiaries.
- For some of these, it is hard to determine if they are a benefit or not.
“Minute Sermons” on Investing
A minister friend used to supplement his church’s weekly newsletter with what he called “minute sermons.” We’ve added short vignettes for, hopefully, a similar effect.
If economic events take a turn for the worse, a WSJ letter-writer has reminded central banks, including our own Federal Reserve, that “a central bank should serve as a lender of last resort, but central banks should take only good collateral and charge high rates of interest.”[6] A lesson must be learned by current participants, even if it might be repeated at a later date by others.
A Montana farmer supplementing his income by monetizing social media posts about life on the farm notes that “internet fame has the shelf life of a banana.”[7]
The AI revolution has come to Wall Street. Banker Jamie Dimon said recently, “Certain things won’t change. I tell people you have to move money, raise money, send money, manage money. But everything else can change.”[8]
As opposed to trading, defined at the beginning of this article, our definition of investing concentrates on high-quality and industry-leading companies with sound financials and strong managements when picking stocks. We anticipate that there will be occasional dramatic market downturns and believe that a sturdy portfolio of high-quality companies has the best chance of rebounding from a major event.
We know that you are the most valuable business development tool that we have. Your referral of a friend, colleague or family member to us is the most important way that we grow. We thank you for your support and want you to know that we are dedicated to serving your best interest.
[1] Ben Glickman and Kystal Hur, “Wall Street Traders Enjoying Their Best Year Ever,” WSJ, 7/16/2026, p B1.
[2] “Joseph Sternberg, “China’s Economy Is in Worse Shape Than You Think,” WSJ, 7/17/2026, p. A15.
[3] Hannah Miao, “China Turns Up Heat on Europeans Over Trade,” WSJ, 7/02/2026, p. A8.
[4] Greg Ip, “Trade Imbalances Pose Global Threat,” WSJ, 6/12/2026, p. A2
[5] Ibid
[6] Tim Quast, “What Walter Bagehot Could Teach the Fed,” WSJ, Letters, 12/30/2022.
[7] Amira McKee, “Family Farms Earn More from Clicks,” WSJ, 6/01/2026, p. B1.
[8] Ben Glickman, Alexander Saeedy and Gina Heeb, “Wall Street Hiring Dilemma: AI Can Model But Can’t Make Next Rainmaker,” WSJ, 6/22/2026.