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Over the past year, the Growth Portfolio gained 16.6%, the Income Portfolio returned 9.2%, and the American Growth Portfolio advanced 12.4%.

Last month, we argued that the market’s advance was being driven more by positioning, liquidity, and mechanical buying than by improving fundamentals. June largely reinforced that view.

The S&P 500 declined, volatility increased, and many of the stocks that had led the market over the past year began to lose momentum. Semiconductor shares were essentially flat despite persistent optimism around artificial intelligence (AI), while the Magnificent Seven fell further below their October 2025 highs. The market’s foundation is becoming increasingly narrow, a dynamic that has historically preceded more challenging periods for investors.

Healthy bull markets tend to broaden over time. Leadership expands, more companies participate, and fresh capital provides support across the market. Today, we are seeing the opposite. A shrinking group of stocks continues to account for a disproportionate share of market performance, institutional hedging activity remains remarkably subdued, and many of the market’s leaders are no longer responding positively to good news.

In our view, these are early signs that liquidity is becoming more constrained beneath the surface. While this does not preclude further gains in the near term, it suggests the market is becoming increasingly dependent on a narrow set of conditions continuing to hold. As history has shown, that can leave investors more vulnerable when sentiment eventually shifts.

The AI theme remains real and transformative. What appears to be changing is how capital is positioned around it. Initially, investors crowded into a trade that benefited from accelerating capital spending, rising growth and inflation expectations, and the assumption that interest rates would remain elevated. Semiconductors, commodities, short-duration assets, and many of the market’s largest technology companies all became beneficiaries of that same underlying view. We believe that trade is beginning to unwind.

One of the clearest examples is emerging in software.

For much of the last year, many institutional investors expressed enthusiasm for AI by owning semiconductor companies while simultaneously shorting, or betting against, software businesses. Semiconductors represented the most direct exposure to AI infrastructure spending, while software became a source of funding and a hedge against disappointment.

As investors reduce overall risk exposure, those short positions must eventually be repurchased. This creates a somewhat unusual dynamic: money leaving one part of the market can create buying pressure in another. In effect, software has begun to behave like a hedge against broader equity weakness.

The result is that some of the cheapest, highest-quality software companies may benefit from precisely the environment that challenges the market’s previous leaders.

We see a similar opportunity developing in bonds.

A growing portion of the market continues to position for persistent inflation and higher interest rates. Despite moderating economic data, investors still assign greater probability to future rate hikes than to a meaningful rate-cutting cycle. In our view, this remains one of the most important disconnects in financial markets today.

The inflation pressures experienced over the past year have largely been driven by a concentrated investment boom centred around AI infrastructure and energy. While that spending has been significant, it has not produced the kind of broad-based inflationary cycle typically associated with permanently higher interest rates.

Beneath the surface, many disinflationary forces remain intact. Wage growth continues to moderate, rents are easing, and fiscal support is decelerating. Credit creation has largely plateaued since April, with new lending becoming increasingly concentrated rather than broad-based. Even financing tied to AI infrastructure and capital spending has begun to slow at the margin. These developments suggest we are moving deeper into a mature phase of the investment cycle rather than entering a new period of sustained inflationary growth.

As these trends become more apparent, we believe investors will gradually move toward pricing slower growth and eventual rate cuts.

If that occurs, long-term Treasury yields should decline. Because bond prices move inversely to yields, lower yields would translate into higher bond prices, particularly for longer-duration bonds. In our view, that remains among the most attractive asymmetrical opportunities available today.

The same theme is also beginning to emerge in currency markets.

Rising volatility within foreign exchange markets suggests growing stresses in global dollar funding. After years of capital flowing overseas through AI investment, commodity purchases, and global supply chains, the next phase may involve increasing demand for U.S. dollar liquidity. Historically, these environments have often produced a stronger U.S. dollar, falling long-term yields, and tighter financial conditions globally.

The market’s most crowded trade has been built around continued economic acceleration, persistent inflation, rising capital spending, and a narrow group of AI beneficiaries. We believe that narrative is becoming increasingly challenged. In its place, markets are beginning to reward a different set of assets: software rather than semiconductors, bonds rather than commodities, long-duration assets rather than short-duration assets, and ultimately a stronger U.S. dollar rather than a weaker one.

That transition is still in its early stages. It may not occur in a straight line. Markets can remain optimistic longer than many expect, and rallies can persist even as underlying conditions deteriorate.

However, just as we noted last month, the foundation beneath this market appears increasingly narrow. Risks remain materially underappreciated. Our focus continues to be preserving capital, identifying opportunities where market expectations diverge from reality, and maintaining the flexibility to act when better risk-reward opportunities emerge.

Model Portfolio Highlights
Growth Portfolio: During June, we reduced our position in U.S. Treasury Inflation-Protected Securities and initiated new positions in Intuit and Adobe. Both are highly profitable software businesses with strong free cash flow generation and attractive growth prospects. Despite continuing to grow revenues at double-digit rates, both stocks remain roughly 65% below their prior highs. We believe the market’s preference for AI infrastructure and semiconductor companies has created a compelling opportunity in high-quality software.

We also sold our short-term U.S. Treasury holdings and increased our exposure to long-term U.S. Treasury bonds. This reflects our view that inflation pressures will continue to ease and that markets remain too skeptical of future rate cuts. If growth and inflation continue to soften as we expect, long-term yields could decline significantly from current levels, creating meaningful appreciation potential for longer-duration bonds.

American Growth Portfolio: Positioning remains aligned with the Growth Portfolio. Please see above for context.

Income Portfolio:During the month, we replaced our short-term U.S. Treasury holdings with long-term U.S. Treasury bonds. This positioning reflects our view that inflation pressures are gradually easing and that long-duration bonds offer attractive upside should markets begin to price slower growth and eventual rate cuts.

Our approach targets opportunities with a significant margin of safety with minimal risk of permanent loss. Patience remains essential in realizing long-term gains.

We advise families and individuals with $1 million or more in investable assets who value prudent stewardship, independent thinking, and a long-term approach to preserving and growing capital. If this approach aligns with your own, we would welcome a conversation.

Thank you for your continued trust.

Yours,

Ben

Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth

Office: 416.369.3024
Email: bwk@wellington-altus.ca
Book time with Ben W. Kizemchuk: Portfolio and Plan Review

Ben Kizemchuk offers full-service wealth management for high-net-worth Canadians including families, business owners, and successful professionals. Ben and his team provide investment advice, financial planning, tax minimization strategies, and retirement planning.

Performance reporting disclaimer: Performance results reflect the returns of each representative model portfolio. Returns are calculated using each model portfolio’s monthly performance, including changes in securities values, and accrued income (i.e., dividend and interest), against its market value at the closing of the last business day of the previous month. Performance results are expressed in the stated strategy’s base currency and are calculated on a net of fees basis. Individual account performance may materially differ from the representative performance history set out in this document, due to factors such as an account’s size, the length of time the strategy has been held, the timing and amount of deposits and withdrawals, the timing and amount of dividends and other income, and fees and other costs. Investors should seek professional financial advice regarding the appropriateness of investing in any investment strategy or security and no financial decisions should be made solely on the basis of the information provided in this document. This is not an official statement from WAPW. Please refer to your official WAPW statement for your specific performance numbers.