If it feels like the market has thrown a new curveball every week this year, you're not imagining it. Between a new Federal Reserve chair, stubborn inflation, an ongoing conflict tied to the Strait of Hormuz, questions about the staying power of the AI trade, and a midterm election on the horizon, 2026 has given investors plenty to process. In a recent episode of RHP Market Talk, Chief Investment Officer Glenn Royal joined Chief Experience Officer Natalie Picha to step back from the daily noise and talk through what these developments actually mean for the economy, the markets, and long-term investors heading into year-end.
Oil, Iran, and a Different Kind of Response
Historically, a spike in oil prices driven by conflict in the Middle East would trigger a fairly predictable chain reaction: an inflationary jolt, a bond sell-off, and falling stocks. This time was different. When fighting resumed near the Strait of Hormuz, oil prices spiked and then came back down, largely because China had already filled its storage tanks while prices were low and had ramped up exports of refined fuel.
The bigger concern now sits in refined products like diesel, where there's no strategic reserve to fall back on and refineries are running at full capacity. With Russian refining capacity also disrupted, the market is at something of a tipping point. A durable resolution to the conflict would help, but in the meantime, the world may be settling into a period of structurally higher energy costs.
A New Fed Chair, and a New Communication Style
With Kevin Warsh now leading the Federal Reserve, the tone out of Washington has shifted. Rather than the detailed forward guidance investors grew used to after 2008, Warsh appears to favor a quieter, less predictable approach, and is even reportedly considering fewer scheduled Fed meetings. The practical effect: bond investors are demanding more term premium to compensate for the added uncertainty, which has kept yields elevated even as inflation concerns have eased somewhat.
In effect, the market is doing some of the Fed's tightening work on its own, through higher long-term yields, without additional moves to the federal funds rate. That's expected to mean a bumpier several months as markets adjust to less explicit guidance. That said, both Warsh and Treasury Secretary Scott Bessent are two of the better minds in Finance and Treasury in the Fed right now, so there’s reason to hope that they will handle things well.
AI Earnings Are Still Doing the Heavy Lifting
Despite a recent pullback in momentum stocks, corporate earnings — particularly in technology — have been remarkably strong. S&P 500 earnings growth has been running around 26% year-over-year, and closer to 45% when investment income from technology holdings is included. Notably, valuations haven't kept pace with that earnings growth, meaning price-to-earnings multiples have actually stayed flat or even contracted in some tech names even as prices rose.
The next phase of the AI story isn't about simple query-and-response tools — it's about agentic AI, where AI systems handle strings of tasks rather than single requests. That shift could increase token usage by a factor of 25 or more by 2030, and it's reshaping where the investment dollars and returns are showing up. Companies with strong cloud infrastructure are beginning to show early revenue payoff from this build-out, which is a meaningful signal for a market that's been watching closely for return on investment.
That said, there are real risks to watch. Competition from lower-cost AI models overseas raises questions about how much businesses will be willing to pay for premium AI tools once the technology matures. And as hyperscalers shift from funding this expansion out of free cash flow to increasingly relying on debt and equity financing, investors are right to keep an eye on the numbers behind the enthusiasm.
A Broadening Market
One encouraging sign: market leadership isn't as narrowly concentrated in a handful of mega-cap tech names as it has been in recent years. Equal-weighted S&P performance has kept pace with cap-weighted performance in 2026, suggesting more companies — including small- and mid-caps — are participating in this growth, aided in part by a broader push toward U.S. manufacturing and industrial reshoring.
Midterms and the Deficit
As November's midterm elections approach, a shift in the House is historically typical for a sitting administration. While political headlines tend to dominate the news cycle, the more durable driver of markets is likely to remain corporate earnings and the trajectory of the AI buildout — not which party controls Congress. Still, longer-term fiscal pressures, including looming questions around Medicare and Social Security funding, remain a factor worth watching, which is part of why RHP continues to favor shorter-maturity bonds in the current environment.
Where RHP Stands Today
Heading into the second half of 2026, RHP's approach remains grounded in the fundamentals: staying diversified across stocks, bonds, and cash; favoring shorter-duration fixed income given ongoing rate uncertainty; and maintaining exposure to both U.S. technology and international markets for diversification. Bond yields are currently near 20-year highs, offering investors a genuinely attractive absolute return.
Perhaps the most important takeaway, though, is one of discipline. As Glenn put it, this year's biggest challenge hasn't been finding the right move to make — it's been resisting the urge to make unnecessary ones. Short-term volatility is, by definition, short-term. Long-term investing success comes from having a plan, staying diversified, and letting time do the work.
This content reflects the views of RHP Wealth Management as of the date recorded and is for informational purposes only. It should not be considered investment, tax, or legal advice.