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The Growth Portfolio finished July up 17.7% over the past year, the American Growth Portfolio gained 16.8%, and the Income Portfolio returned 3.9%.
Despite significant swings beneath the surface in July, the headline indices were relatively unchanged. The S&P 500 has now gone more than two months without making a new high, even as optimism surrounding artificial intelligence (AI) remains elevated. Our positioning continues to reflect a defensive stance toward broad equity markets, complemented by a small number of opportunistic investments that we believe stand to benefit from the macro risks now emerging.
One of the more important developments we are observing is not what investors own, but what they no longer own.
Simply put, almost nobody is hedged. Earlier this year, investors who bought traditional downside protection were punished when markets rebounded sharply. Since then, many professional money managers have avoided rebuilding those hedges. Instead of buying protection against a market decline, they have increasingly expressed their views through stock-specific trades.
The most popular of these has been remarkably simple: buy semiconductor companies and bet against software companies. For much of the past year, that trade made sense. Semiconductors were viewed as the beneficiaries of the AI building boom, while software was seen as a slower-moving part of the story.
The problem is that crowded trades eventually become vulnerable.
When investors decide to reduce risk, they do not simply sell their winners. They also buy back their losing short positions. That means the same investors who have spent the last year buying semiconductors and shorting software may eventually have to do the opposite.
This is one reason we find software increasingly attractive.
Many high-quality software businesses now trade at reasonably inexpensive valuations despite having durable business models, recurring revenue, and strong cash flows. More importantly, they could benefit from a powerful source of demand as investors unwind one of the market’s most crowded trades.
In a strange way, software has begun to look like a form of hedge. As money leaves the market’s most popular positions, some of that capital may flow directly back into software through short-covering activity. We believe this story is still in its early stages.
At the same time, several broader measures of market risk are beginning to demand attention. Credit markets, which often provide an early warning signal, have started to show signs of stress beneath the surface. Investor borrowing, or margin debt, in July reached levels that have historically appeared at the tail end of market cycles. Measures of market speculation remain elevated even as market returns have started to soften.
While this doesn’t mean a bear market must start imminently, it does suggest the balance between risk and reward is becoming far less favourable than it was a year ago.
The bigger issue is that many investors continue to view the AI boom as proof that a new era of persistent inflation and economic acceleration has arrived.
We are not so convinced.
There is a meaningful difference between an investment boom and a broad economic boom.
The surge in AI spending has been concentrated in a narrow group of beneficiaries including data centres, computing equipment, energy infrastructure, and semiconductor production. It has been a tremendous driver of growth for those specific industries. But it has not spread through the economy in the same way that a housing boom or consumer credit expansion typically does.
In past growth cycles, economic activity became widely distributed. Construction increased. Consumer spending accelerated. Wage growth broadened. Credit expanded across households and businesses alike. Today’s environment looks different.
Much of the recent growth has flowed into a relatively narrow group of AI-related investments. While this has boosted demand for certain products and commodities, it has not created the kind of self-reinforcing economic cycle that typically leads to sustainably higher growth and inflation. In fact, several important inflation measures continue to move in the opposite direction.
This has important implications for both bonds and currencies.
As the current investment cycle matures, the economy may begin to look slower rather than faster. If that happens, long-term interest rates could decline meaningfully from current levels. That would be supportive for high-quality longer-term bonds, an area we believe remains one of the most attractive opportunities available today.
We are also paying close attention to developments in global currency markets.
Over the past months, we have highlighted growing stress in global currency markets. Because currencies sit at the foundation of the financial system, pressures there often signal risks extending beyond individual stocks or sectors. In the final days of July, U.S. authorities took action involving the euro and Japanese yen to support market stability. We view this as another sign that financial strains are becoming more systemic and that the cycle is moving into a later, far more fragile stage. As a result, we believe a stronger U.S. dollar is increasingly likely as global demand for liquidity rises.
We are also watching volatility markets closely. Several of the forces we have discussed throughout this letter, including elevated speculation, increasingly crowded positioning, emerging currency-market stress, and signs of a maturing credit cycle, are beginning to point in the same direction. Individually, none are decisive.
Collectively, they suggest the unusually calm market environment of the recent months may be approaching an inflection point. While the timing is always uncertain, we believe the odds favour a meaningful rise in market volatility during 2026 as these pressures increasingly converge.
If we are correct, the next phase of the market could look very different from the last.
Software may outperform semiconductors. Bonds may outperform commodities. Long-duration assets may outperform short-duration assets. The U.S. dollar may strengthen when many expect weakness.
Major market turning points rarely happen all at once. They begin quietly. A few trades become crowded. Leadership narrows. Confidence grows. Then, gradually, the assumptions that drove the previous cycle break down. We believe we are now at that point.
As always, our focus remains on protecting capital, staying patient when opportunities are scarce, and positioning portfolios where expectations and reality have drifted furthest apart.
Model Portfolio Highlights
Growth Portfolio: During July, we exited our position in U.S. Treasury Inflation-Protected Securities and initiated a new position in Kinross Gold. We view gold producers as an attractive way to gain exposure to rising economic uncertainty, increasing market volatility, and potential shifts in global capital flows. The portfolio currently consists of Adobe, Cenovus Energy, Intuit, Kinross Gold, Thomson Reuters, and long-term U.S. Treasury bonds.
American Growth Portfolio: Positioning is aligned with the Growth Portfolio.
Income Portfolio: In July, we reduced our position in U.S. Treasury Inflation-Protected Securities and added a basket of U.S. healthcare stocks. Healthcare is currently trading at one of its largest valuation discounts to the broader market in decades, despite benefiting from a durable tailwind: an aging population. We view the sector as an attractive long-duration asset, offering both defensive characteristics and meaningful upside should growth become increasingly scarce elsewhere in the market. Following these changes, the portfolio consists of U.S. Treasury Inflation-Protected Securities, long-term U.S. Treasury bonds, and a diversified basket of U.S. healthcare companies.
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.
Market Commentary
August 2026 Update
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The Growth Portfolio finished July up 17.7% over the past year, the American Growth Portfolio gained 16.8%, and the Income Portfolio returned 3.9%.
Despite significant swings beneath the surface in July, the headline indices were relatively unchanged. The S&P 500 has now gone more than two months without making a new high, even as optimism surrounding artificial intelligence (AI) remains elevated. Our positioning continues to reflect a defensive stance toward broad equity markets, complemented by a small number of opportunistic investments that we believe stand to benefit from the macro risks now emerging.
One of the more important developments we are observing is not what investors own, but what they no longer own.
Simply put, almost nobody is hedged. Earlier this year, investors who bought traditional downside protection were punished when markets rebounded sharply. Since then, many professional money managers have avoided rebuilding those hedges. Instead of buying protection against a market decline, they have increasingly expressed their views through stock-specific trades.
The most popular of these has been remarkably simple: buy semiconductor companies and bet against software companies. For much of the past year, that trade made sense. Semiconductors were viewed as the beneficiaries of the AI building boom, while software was seen as a slower-moving part of the story.
The problem is that crowded trades eventually become vulnerable.
When investors decide to reduce risk, they do not simply sell their winners. They also buy back their losing short positions. That means the same investors who have spent the last year buying semiconductors and shorting software may eventually have to do the opposite.
This is one reason we find software increasingly attractive.
Many high-quality software businesses now trade at reasonably inexpensive valuations despite having durable business models, recurring revenue, and strong cash flows. More importantly, they could benefit from a powerful source of demand as investors unwind one of the market’s most crowded trades.
In a strange way, software has begun to look like a form of hedge. As money leaves the market’s most popular positions, some of that capital may flow directly back into software through short-covering activity. We believe this story is still in its early stages.
At the same time, several broader measures of market risk are beginning to demand attention. Credit markets, which often provide an early warning signal, have started to show signs of stress beneath the surface. Investor borrowing, or margin debt, in July reached levels that have historically appeared at the tail end of market cycles. Measures of market speculation remain elevated even as market returns have started to soften.
While this doesn’t mean a bear market must start imminently, it does suggest the balance between risk and reward is becoming far less favourable than it was a year ago.
The bigger issue is that many investors continue to view the AI boom as proof that a new era of persistent inflation and economic acceleration has arrived.
We are not so convinced.
There is a meaningful difference between an investment boom and a broad economic boom.
The surge in AI spending has been concentrated in a narrow group of beneficiaries including data centres, computing equipment, energy infrastructure, and semiconductor production. It has been a tremendous driver of growth for those specific industries. But it has not spread through the economy in the same way that a housing boom or consumer credit expansion typically does.
In past growth cycles, economic activity became widely distributed. Construction increased. Consumer spending accelerated. Wage growth broadened. Credit expanded across households and businesses alike. Today’s environment looks different.
Much of the recent growth has flowed into a relatively narrow group of AI-related investments. While this has boosted demand for certain products and commodities, it has not created the kind of self-reinforcing economic cycle that typically leads to sustainably higher growth and inflation. In fact, several important inflation measures continue to move in the opposite direction.
This has important implications for both bonds and currencies.
As the current investment cycle matures, the economy may begin to look slower rather than faster. If that happens, long-term interest rates could decline meaningfully from current levels. That would be supportive for high-quality longer-term bonds, an area we believe remains one of the most attractive opportunities available today.
We are also paying close attention to developments in global currency markets.
Over the past months, we have highlighted growing stress in global currency markets. Because currencies sit at the foundation of the financial system, pressures there often signal risks extending beyond individual stocks or sectors. In the final days of July, U.S. authorities took action involving the euro and Japanese yen to support market stability. We view this as another sign that financial strains are becoming more systemic and that the cycle is moving into a later, far more fragile stage. As a result, we believe a stronger U.S. dollar is increasingly likely as global demand for liquidity rises.
We are also watching volatility markets closely. Several of the forces we have discussed throughout this letter, including elevated speculation, increasingly crowded positioning, emerging currency-market stress, and signs of a maturing credit cycle, are beginning to point in the same direction. Individually, none are decisive.
Collectively, they suggest the unusually calm market environment of the recent months may be approaching an inflection point. While the timing is always uncertain, we believe the odds favour a meaningful rise in market volatility during 2026 as these pressures increasingly converge.
If we are correct, the next phase of the market could look very different from the last.
Software may outperform semiconductors. Bonds may outperform commodities. Long-duration assets may outperform short-duration assets. The U.S. dollar may strengthen when many expect weakness.
Major market turning points rarely happen all at once. They begin quietly. A few trades become crowded. Leadership narrows. Confidence grows. Then, gradually, the assumptions that drove the previous cycle break down. We believe we are now at that point.
As always, our focus remains on protecting capital, staying patient when opportunities are scarce, and positioning portfolios where expectations and reality have drifted furthest apart.
Model Portfolio Highlights
Growth Portfolio: During July, we exited our position in U.S. Treasury Inflation-Protected Securities and initiated a new position in Kinross Gold. We view gold producers as an attractive way to gain exposure to rising economic uncertainty, increasing market volatility, and potential shifts in global capital flows. The portfolio currently consists of Adobe, Cenovus Energy, Intuit, Kinross Gold, Thomson Reuters, and long-term U.S. Treasury bonds.
American Growth Portfolio: Positioning is aligned with the Growth Portfolio.
Income Portfolio: In July, we reduced our position in U.S. Treasury Inflation-Protected Securities and added a basket of U.S. healthcare stocks. Healthcare is currently trading at one of its largest valuation discounts to the broader market in decades, despite benefiting from a durable tailwind: an aging population. We view the sector as an attractive long-duration asset, offering both defensive characteristics and meaningful upside should growth become increasingly scarce elsewhere in the market. Following these changes, the portfolio consists of U.S. Treasury Inflation-Protected Securities, long-term U.S. Treasury bonds, and a diversified basket of U.S. healthcare companies.
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.
Recent Posts
July 2026 Update
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June 2026 Update
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May 2026 Update
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April 2026 Update
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March 2026 Update
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The opinions contained herein are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Wellington-Altus Private Wealth. Assumptions, opinions and information constitute the author’s judgement as of the date this material and subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. All third party products and services referred to or advertised in this presentation are sold by the company or organization named. While these products or services may serve as valuable aids to the independent investor, WAPW does not specifically endorse any of these products or services. The third party products and services referred to, or advertised in this presentation, are available as a convenience to its customers only, and WAPW is not liable for any claims, losses or damages however arising out of any purchase or use of third party products or services. All insurance products and services are offered by life licensed advisors of Wellington-Altus. Wellington-Altus Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. All trademarks are the property of their respective owners.