Astra Series Market Commentary | July 2026

Wildermuth Commentary July 2026.pdf

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Markets Are Expensive, But Companies Keep Delivering

At the halfway point of the year, despite the war in Iran and various other challenges, the S&P500 is up nearly 10% on the year, on pace for another good year. As we have mentioned several times in past newsletters, the stock market is expensive and has been for a while. But, the reason is simple -- corporate profits have been very strong and seem to keep getting stronger.

In the first quarter, companies in the S&P 500 reported a net profit margin of 14.8%, the highest level FactSet has recorded since it began tracking the metric in 2009. This means that companies kept almost 15 cents of profit from every dollar of revenue, an unusually strong percentage. The previous record was 13.2%, set only one quarter earlier.[i]

And the strength is not limited to one corner of the market. Technology is still doing a lot of the heavy lifting, especially companies tied to AI infrastructure. But financials and industrials are also reporting margins above their five-year averages. That broader strength suggests corporate America is adapting better than expected to higher interest rates, geopolitical risk, and lingering inflation pressure.

There is also evidence that the market strength is broadening. The Dow recently reached a fresh record, helped by healthcare, financials, industrials, and large technology names. Smaller companies also participated with the Russell 2000 gaining 1.4%. A broader market is usually healthier than one carried by a handful of giant stocks.

The labor market also remains better than many expected. Employers added 172,000 jobs in May, well above the 80,000 expected by analysts surveyed by The Wall Street Journal. The unemployment rate held at 4.3%, while prior months were revised a bit higher..[ii]

Profit margins are expected to dip slightly in the second quarter, but earnings surprises could push them to another record once companies report. A key reason is the rising value of private AI investments held by several large public companies, including Alphabet, Amazon, and Nvidia.

As private AI companies such as Anthropic and OpenAI raised money at higher valuations, those stakes were marked up. Those increases flow through reported profits, even though they reflect higher estimated investment values rather than normal operating results. The effect was already meaningful in the first quarter and may be even larger in the second. This adds another layer to the AI story, where enthusiasm for private AI companies can flow back into public company earnings and support already elevated market valuations.

Investors should still be careful. The S&P 500 has been trading around 20 times expected earnings over the next 12 months, above its 10-year average..[iii] When valuations are that high, the market has less room for disappointment. If profit margins slip, AI spending slows, or pricing power fades, stocks could pull back sharply.

The market is not cheap and real risks exist. AI enthusiasm continues to drive the market, and their valuations are not only stretched but also got an extra boost from rich underlying private company valuations. Still, companies are earning money, margins remain very strong, and the economy keeps creating jobs. For long-term investors, that is a solid backdrop. It argues for staying invested, while remaining selective and disciplined about what you own.

Daniel Wildermuth

Portfolio Manager, Quartz Astra Strategies

[i] Ge Huang, Vicky. “Why Wall Street Bulls Aren’t Worried About Sky-High Stock Prices.” Wall Street Journal. 2026, June 29. https://www.wsj.com/finance/stocks/why-wall-street-bulls-arent-worried-about-sky-high-stock-prices-79db9e16

[ii] Ge Huang, Vicky. “Why Wall Street Bulls Aren’t Worried About Sky-High Stock Prices.” Wall Street Journal. 2026, June 29. https://www.wsj.com/finance/stocks/why-wall-street-bulls-arent-worried-about-sky-high-stock-prices-79db9e16

[iii] Butters, John. “Earnings Insight.” FactSet. FactSet Research Systems, Inc. 2026, June 26. https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_062626.pdf

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DATA SOURCES

Market Data: https://www.wsj.com/market-data


INDEX DESCRIPTIONS

The Standard & Poor’s 500 Index is a capitalization-weighted index that is generally considered representative of the U.S. large capitalization market.

The NASDAQ Composite Index is a capitalization-weighted index that is comprised of all stocks listed on the National Association of Securities Dealers Automated Quotation System stock market, which includes both domestic and foreign companies.

The Dow Jones Industrial Average is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.

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