While equity indices posted strong year-to-date gains—led by the NASDAQ and EAFE—market technicals have started to weaken. The S&P 500 has dipped below its 20-day moving average, signaling a potential near-term pullback. Recent volatility has been fueled by the bankruptcies of First Bands and Tricolor, reigniting concerns about regional bank stability and unresolved commercial office sector issues. Despite this, pockets of strength remain in recession-resilient sectors such as gold, staples, utilities, real estate, and biotech. PVG notes that their emerging healthcare focus, particularly GRAL’s breakthrough early-stage cancer blood test, continues to outperform and could be transformative once approved for broad use in 2026.

Looking forward, the outlook centers on the expectation of Federal Reserve rate cuts by early 2026, potentially bringing the Fed Funds rate down to 3.5%. Lower rates should reduce financing costs for consumers and businesses, moving the economy from a late- to early-cycle phase. PVG anticipates stronger relative performance in small caps, biotech, financials, real estate, industrials, and materials—sectors that typically lead early-cycle recoveries. As the economy transitions and rate pressures ease, they expect broader market participation beyond mega-cap tech, with cyclicals like TXN, DHI, and DOW offering compelling long-term value opportunities tied to industrial, housing, and materials growth.

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