Friday Focus – July 24, 2026

5 minute read

Smart insight and clear visuals that matter – what we’re watching now and how intention and conviction shape our portfolios.

Small Cap

We have observed US small-cap stocks are bucking years of underperformance to enjoy their strongest returns in more than 20 years, as we see investors are starting to look beyond high-flying big tech companies to lowly valued stocks benefiting from the AI investment boom. The Russell 2000 index, the US small-cap benchmark, is up 20 percent so far this year, on track for its best performance since 2003, compared with a 10 percent rise in the blue-chip S&P 500 and a gain of less than 3 per cent in the concentrated Magnificent Seven mega-cap tech stocks. (Source: Financial Times, July 13, 2026.)

We believe the engine behind this small-cap rotation isn't balance sheet health; it’s narrative. As investors grow increasingly anxious about whether hyper-scalers can turn their spending into profits, many investors are turning their focus to small caps that are benefiting from this investment. Since mid-2025, Russell 2000 companies with negative earnings per share (EPS) have climbed 154%, while their profitable peers gained just 34%. That momentum hasn't slowed: year-to-date, these unprofitable firms are up 45%, more than doubling the 18% return on profitable small caps. (Source: Financial Times, July 13, 2026.) The rotation reflects a broader willingness among investors to look beyond current earnings toward potential future beneficiaries of AI spending.

loss-making companies in the russell 2000 have soared

Private Equity

An article from the WSJ highlights the prevalence of private equity investments stuck in funds past their intended lifespan. This has been an area we have been allocating away from as interest rates have risen and have remained elevated.

The net asset value of U.S. private-equity assets stuck in funds at least a decade old reached an all-time high of $348.5 billion at the end of 2025, according to PitchBook data. A wave of maturing assets in the seven-to-nine-year-old bucket behind them is also rising. The net asset value of those funds reached $512.7 billion in 2025. (Source: Wall Street Journal, July 21, 2026.)

The pressure increases concern that these investments will probably need to be sold at discounts to current NAV. If an influx of investors seeks to redeem from legacy evergreen private equity funds, redemptions could be subject to gating. Once a fund is gated it is possible for capital to slow and reduce the ability to take advantage attractive investments.

net asset value in us private equity buyout funds, seven years and older

Royalty Companies

We have observed that natural resource royalty companies continue to benefit where inflation expectations are increasing and from the emerging structural demands due to defense, industrialization, and power/AI development. Despite the tailwind, Horizon Kinetics highlights that the believe these type of companies are significantly under- represented in the equity markets.

As of June 2026, the total weight of oil and gas producers in the S&P is 2.3%. Only one constituent, at a 0.03% weight, is a royalty company.

There are only two mining companies in the S&P 500. These are the world’s largest gold company and second larges publicly traded copper miner. They amount to a 0.3% weight. The only land and water exposure in the S&P 500 is on a look through basis operating division of the mentioned energy royalty company.

In respect of the $14 trillion managed in US equity indexed assets. The total available market cap of publicly traded royalty companies is $183 BN, or 1.3% of that. 53% of the $183 BN is represented by only two companies. (Source: Horizon Kinetics, June 2026)

Economic Calendar: Week Ahead (Eastern Time)

Mon, 7/27 @ 8:30 am: Durable Goods

Tues, 7/28 @ 8:30 am: Advance Economic Indicators Report
@ 8:30 am: Wholesale Inventories and Retail Inventories Reports
@ 9:00 am: S&P Cotality Case-Shiller Home Price Index
@ 10:00 am: Consumer Confidence

Wed, 7/29 @ 2:00 pm: U.S. Interest Rate Decision

Thur, 7/30 @ 8:30 am: Advance Estimate GDP
@ 8:30 am: Weekly Jobless Claims
@ 8:30 am: Personal Income, M/M%
@ 8:30 am: Consumer Spending, M/M%
@ 8:30 am: PCE Price Index, M/M% and Y/Y%
@ 8:30 am: PCE Core Price Index, M/M% and Y/Y%

Fri, 7/31 @ 8:30 am: Employment Cost Index
@ 10:00 am: U. Michigan Final Consumer Survey

The Team Behind Friday Focus

Mary Ahn headshot
Mary Ahn
Investment Research and Portfolio Strategy Manager

Calvin Jones
Cal Jones, CFA
Managing Director of Fixed Income

Eric Speron, CFA
Managing Director of Equities

Alton Tjahyono, CFA
Sr. Investment Strategist

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