Your Portfolio Doesn’t Watch the News

I hope everyone is having a wonderful summer. Ours has been filled with footie, or what old school US fans would call soccer. Lots and lots of footie. Dare I say that the first round of the World Cup, with 4 games a day, was (almost) too much footie?

While I've been watching footie, the financial media has been watching...well...everything else. Iran. Oil prices. Tariffs. Inflation. Interest rates. Artificial intelligence. Depending on which network you turned on, civilization itself seemed to be ending every Tuesday afternoon.

And yet, despite the constant barrage of alarming headlines, your portfolio kept doing what it is supposed to do. It goes up, it goes down, but in the end, it pays attention to what matters. More on that later. That's because your portfolio doesn't watch the news.

The market doesn't care about cable television, social media, or the headline of the day. It doesn't panic because oil spiked on Monday or celebrate because inflation came in a tenth of a percent below expectations on Thursday (ok, it panics about those things in the short term). Instead, the market is concerned about thousands of businesses around the world that wake up every morning trying to invent new products, serve customers, increase profits, and create value for shareholders.

Before we dive in, Happy 250th birthday, America!

Whatever our political differences, it's worth remembering that investors aren't buying a flag. They're investing in institutions.

The United States continues to enjoy enormous structural advantages: the rule of law, deep and transparent capital markets, strong property rights, world-leading universities, entrepreneurial culture, abundant energy, and an unmatched ability to attract both capital and talent from around the world.

American exceptionalism isn't the belief that we'll never face challenges. It's the belief that our institutions have repeatedly adapted through wars, recessions, inflation, political division, and technological revolutions. Betting against America has historically been an expensive trade.

Iran, Oil, and The Price at the Pump

After Israel and Iran exchanged direct military strikes and the United States entered the conflict by targeting Iranian nuclear facilities, headlines immediately focused on the possibility of a broader regional war. Brent crude briefly surged to around $120 per barrel (up from below $80) as analysts debated whether Iran might close the Strait of Hormuz - a waterway through which roughly one-fifth of the world's oil supply passes.

Within days, oil prices had fallen back close to where they started as investors concluded that the conflict was unlikely to create a lasting disruption to global energy markets. Stocks recovered almost immediately. While markets continue to react to each new headline, a measure of calm has returned.

The market wasn't ignoring the headlines - it was simply asking a different question: Will this materially change the long-term value of the businesses we own? More often than not, the answer is no. Most headlines feel much bigger in the moment than they ultimately prove to be.

The Dog Who Caught the Car: A Tale of the New Fed Chair 

For years, it was easy to criticize the Federal Reserve from the outside. Inflation was too high. Interest rates were too high. The Fed was ineffective and had lost its way.

Then Kevin Warsh became the guy heading the Fed. The problem for the dog who chases the car when that dog catches the car: what’s next?

For much of the past year, Warsh argued that the Federal Reserve had waited too long to begin lowering interest rates. Then he inherited an economy that refused to cooperate with stubbornly high inflation. If you cut rates too soon, you risk reigniting inflation or undermining the Fed's inflation-fighting credibility. If you keep rates where they are, you risk slowing the economy. Warsh is stuck with no easy decisions in sight.

Welcome to central banking, Mr. Warsh. We can’t wait to see where we go from here.

The Second Derivative of the National Debt

There’s one headline from this quarter that you probably didn’t notice but is of incredible importance. Earlier this year, U.S. debt held by the public surpassed the nation's annual economic output - an uncomfortable milestone previously reached only briefly during World War II and the pandemic. Economists aren't predicting an imminent fiscal crisis, but the direction of travel should concern all of us.

For those of you who remember Calculus, the first derivative tells you how fast something is changing. The second derivative tells you whether that change is accelerating. Unfortunately, both are moving in the wrong direction. The debt keeps growing every year, and it is growing at an increasingly fast rate. If the first derivative gets your attention, the second derivative should keep you awake at night.

Countries rarely go broke overnight. There is no well-defined tipping point or “point of no return”. More commonly, persistent borrowing slowly pushes interest rates higher, crowds out productive investment, and leaves policymakers with fewer options when the next crisis inevitably arrives.

Fortunately, markets aren't yet signaling panic. Treasury yields remain reasonably close to their long-term averages, reflecting continued confidence in America's economy and institutions.

A debt crisis rarely announces itself in advance. A debt crisis builds quietly over many years before suddenly becoming everyone's concern. That's why this remains one of the few issues I genuinely worry about over the next decade.

On Queue, Social Security Has Entered the Conversation

The latest Social Security Trustees Report pulled in the expected depletion date for the combined trust funds from 2033 to 2032 (a trend that has repeated itself several times over the past few years). Before anyone panics, it's worth remembering that "trust fund depletion" does not mean Social Security is bankrupt or completely disappears. If Congress takes no action before then, ongoing payroll taxes would still be sufficient to pay roughly 75% of scheduled benefits. (Said another way, current workers pay for 75% of Social Security payouts.)

What it does mean is that Congress will, very soon, need to make difficult choices - higher taxes or reduced benefits. Reduced benefits can take many forms: a haircut for current retirees, later retirement ages for younger Americans, reduced benefits for higher-income retirees, taxation of benefits, and IRMAA-like surcharge, etc. Politicians have been postponing those choices for decades. History suggests they'll continue postponing taking action until they absolutely can't wait a minute more (C-SPAN watch party in 2031 anyone?).

The Elephant in The Room: SpaceX 

Several clients have asked whether they should own SpaceX. The short answer is that we don't own it directly.

Say what you will about Musk the person, you have to admire what Musk and his team have accomplished. You may recall that SpaceX (the startup) had to rescue astronauts stranded at the international space station by Boeing/ULA (the incumbent); you may recall the first “chopsticks” recovery of a SpaceX rocket in 2024, which is essentially a rocket reusability story that NASA first started working on with the Space Shuttle in the early 1970’s but never fully realized; SpaceX launched 165 orbital missions in 2025 (that’s about one every other day), which is more than all other countries combined, and compares favorably to the 27 launches credited to all other US companies (NASA has limited launch capability, had zero launches in 2025, but did launch one rocket in 2026). And that’s just rockets. SpaceX operates Starlink, the world’s largest satellite communications network, has rapidly expanding AI capabilities, and own X (formerly Twitter).

My hesitation comes from the current valuation, and the “moon shot” aspect of the company. Let’s just say that if Musk is able to colonize Mars, a dream he has been working towards for nearly 30 years (and fears he won’t accomplish in his lifetime), then SpaceX is undervalued. Accomplishing anything less than that, and SpaceX is an amazing company but has too high of a valuation.

The good and bad news? You may own a small piece very soon. SpaceX is on the fast track to be added to broad market indexes, which means that every portfolio in America will be one step closer to having a little bit of SpaceX.

The Great Main Street versus Wall Street Divergence

One of the strangest features of today's economy is the widening gap between how investors feel and how consumers feel. The graph below shows sentiment over a roughly 75 year period with lows around 1980 (slow economy and high inflation, aka “stagflation”), 2008-2009 (Great Recession), 2011 (US Debt Ceiling fight, US Debt downgrade, European debt crisis), 2022 (low point of the COVID-19 pandemic). As you can see, most of these low points are related to recessions or significant issues with the economy.

Part of this disconnect is simply human nature. Most people don't experience "the economy" through the S&P 500. They experience it through grocery bills, insurance premiums, mortgage rates, and whatever they paid to fix the air conditioner last month. Investors, meanwhile, care about earnings, productivity, innovation, and future cash flows. Both perspectives are real – they are simply measuring different things.

Consumer confidence remains near levels normally associated with recessions, while stock valuations sit near record highs. Historically, these two measures moved together. Since the pandemic, we've witnessed a remarkable divergence between how consumers feel about the economy and how investors value it. The graph below really shows the disconnect between Main Street (as measured by consumer sentiment) and Wall Street (as measured by the S&P 500).

Main Street might be watching the news, it might be looking at political polarization, it might be looking at prices at the grocery store which continue to go up. That’s not what Wall Street is looking at.

The Market Isn't Watching the News, It's Watching Earnings

It's easy to forget what ultimately drives stock prices. Wars, elections, interest rates, tariffs, and inflation all dominate the headlines, but over long periods of time, stock prices follow one thing above all else: corporate earnings.

As companies earn more money, the value of those businesses tends to increase over time. It's not always a straight line, and emotions often cause prices to swing far above or below fair value in the short run, but earnings remain the engine that drives long-term returns.

The chart below helps explain why the market has remained so resilient despite the constant stream of unsettling headlines. Analysts currently expect S&P 500 earnings to grow roughly 26% in 2026, followed by another 17% in 2027. Those are ambitious forecasts, and analysts have certainly been wrong before. But if companies deliver anything close to those expectations, today's market valuations become much easier to justify.

Investors aren't paying today's prices for yesterday's earnings—they're paying for the earnings they expect companies to generate tomorrow.

Trump Accounts: Money for Nothing

Setting aside you whether you love or hate our 47th President, the question of Trump Accounts is pretty straightforward. If you have a child or grandchild under age 18, especially if they were born between January 1, 2025 and December 31, 2028, you should take a serious look at opening a Trump Account. These new custodial retirement accounts invest exclusively in low-cost U.S. stock index funds. Children born during the eligibility window (2025-2028) receive a free $1,000 contribution from the federal government. All families can contribute up to $5,000 per year thereafter (without earned income, which is a requirement for IRA and Roth IRA accounts). The accounts can be opened through the IRS website, or by filing IRS Form 4547, and are held in the child's name until age 18.

Are Trump Accounts perfect? No. If your primary goal is saving for college, a 529 plan will often be the better tool. But if your child qualifies for the $1,000 government contribution, I think it's hard to argue against taking advantage of it. As I've said many times, one of the greatest gifts you can give a child is time. A thousand dollars invested at birth has nearly two decades to compound before they can even touch it. Free money plus decades of compounding is a combination that's hard to beat.

Summary

Markets have a remarkable ability to disappoint both the optimists and the pessimists - often in the same week. Fortunately, your portfolio doesn't watch the news.

The headlines will change. They always do. Our investment philosophy won't. We remain long-term investors. We remain disciplined, diversified, and focused on the long term, trusting that patience, not predictions, is what ultimately builds wealth.

All the best,

Chris Duke
July 10, 2026

DISCLOSURES

This is being provided for informational purposes only and should not be construed as a recommendation to buy or sell any specific securities. Past performance is no guarantee of future results, and all investing involves risk. Index returns shown are not reflective of actual performance nor reflect fees and expenses applicable to investing. One cannot invest directly in an index. The views expressed are those of Chris Duke and do not necessarily reflect the views of Mutual Advisors, LLC, or any of its affiliates

Investment advisory services are offered through Mutual Advisors, LLC, DBA Context Wealth, an SEC-registered investment adviser.