Article equitymarketcommentaryaug2026 ltr

Equity Market Commentary SLIMMON’S TAKE | APPLIED EQUITY TEAM | August 2026

An August full of distractions ANDREW SLIMMON Managing Director and Senior Portfolio Manager, Applied 1 The White House has certainly done its job to fill an otherwise quiet Equity Team period for financial markets with plenty of content for the business media to cover:

1. The US conflict with Iran wages on. 2. The White House/Treasury has picked a new fight with the “bond vigilantes” by intervening in the bond market. 3. The US has a new trade tussle with Canada.

Ripe material to create anxiety and sow uncertainty.

Meanwhile the VIX, which measures the expected volatility in the S&P 500, remains in snooze mode at 15. This suggests, despite scary talk, the equity market is not buying it.1

In effect, the discussions are filling time but have not been market moving events.

Chicago Cubs baseball is more exciting right now, in my opinion.

3 During this period of attempted distractions, we can sharpen our focus on what will matter as we exit the triviality of August, some of which I have discussed in the past.

4 While the powerful earnings story is getting more consideration than it did earlier in the year, I still don’t think earnings revisions are fully priced in.

As I’ve said before, by December 31, 2026, investors will no longer be focused on 2026 earnings; their attention will be squarely on 2027 earnings and beyond.

1 Bloomberg as of August 27th, 2026. The index performance is provided for illustrative purposes only and is not meant to depict the performance of a specific investment. Past performance is no guarantee of future results. August 2026 | SLIMMON’S TAKE 1

I think there is much more upside to the S&P 500 based on the continued upward reevaluation of 2027 earnings.

Current projections for 2027 S&P 5002 earnings of nearly $415 support the index ending 2026 well north of 8,000.

Keep in mind, company guidance remains extremely robust with seemingly no let-up, pointing to another quarter of strong earnings growth and potentially further positive earnings revisions.

This means $415 might be too low to start next year.

5 We can debate whether those 2027 earnings will materialize.

However, realistically we won’t know for certain until well into 2027, not on December 31st, 2026.

Anyone who has suggested that earnings revisions are peaking or rolling over has been trampled by the earnings bulls.

6 Second quarter earnings reports for the hyperscalers with cloud infrastructure businesses suggest to me that their big capital investments are paying off.

Their growth rates for the infrastructure portion of their businesses accelerated.

“The spend comes first. The pricing, utilization and cash flow follow. The market may be recognizing the cost immediately while underestimating the operating leverage still to come.”3

Yet Wall Street remains dubious, questioning the long-term payoff.

My conclusion is that it’s the classic mismatch between Wall Street’s desire for quarterly results and corporations’ willingness to invest for the future.

7 To be clear, our endorsement of and positioning in these large hyperscalers has negatively impacted Applied Equity’s US equity performance year-to-date.

Mega-cap technology returns cumulatively have been disappointing.

We recognize these are large positions in the portfolios.

Particularly Nvidia and Google.4

In the past, we have trimmed these stocks on the heels of good stock performance, when the position sizes have gotten very large.

But given their lackluster performance for much of the summer, we have chosen largely to stick with them for now.

2 Factset as of August 27th, 2026. 3 Citadel Securities August 24th, 2026. 4 As of 7/31/2026: NVIDIA and Google are: 11.57% and 11.65% of Applied US Core Equity total assets, 10.98% and 9.91% of Applied Global Concentrated Equity total assets, and 7.11% and 8.93% of Applied Global Core Equity total assets. The returns referred to in the commentary are those of the representative indices, unless otherwise noted and are not meant to depict the performance of a specific investment. Past performance is not guarantee of future results. August 2026 | SLIMMON’S TAKE 2