Five for Friday – July 17, 2026

Gold, Profits, Diversify, Themes, and Bubble Parable

1. Gold

Based on the volume of inquiries in my inbox, one of the more confounding stories of 2026 is the underperformance of Gold amid tensions in the Middle East, inflation pressures, and continued debt/deficit worries. On one hand, it’s a raging bull market in stocks and interest rates are higher – both things that typically weigh on diversifying, store-of-value-type assets (bitcoin is also down). But the other reason for Gold’s weakness speaks to a more fundamental truth of investing: what matters most is not whether the environment is good or bad for a certain asset, but whether it turns out better or worse than what was already in the price. Whether investors expected war, Gold’s 110% return across 2024-25 was almost certainly a reflection of markets pricing a future with more geopolitical friction, fiscal uncertainty, and inflation volatility. Markets are always forward-looking, so prices move in anticipation of potential developments (even if they’re only obvious with hindsight), and can then react counterintuitively when said developments actually occur. Gold experiencing a "buy the rumor, sell the news" moment doesn’t mean the bullish case disappeared, but that the huge 2024-25 rally in Gold may have reflected that potential before it became fully realized.  

 2. Profits

Speaking of this phenomenon, one of the more stunning items of the last few weeks was Samsung reporting a 19-fold rise in its profits on huge demand for memory chips…and the stock fell 10%. Sky high expectations and a 450%+ return over the previous year will do that. Which leads us into the upcoming earnings season and expectations for another quarter of 20%+ profit growth for the S&P 500 (something essentially unseen outside of post-recession recoveries). This sets the stage for lukewarm stock reactions even if Q2 results are good. On the other hand, another quarter of robust profit growth will reinforce this as a bull market driven by earnings power, not hype, and help anchor valuations to reality (as the chart shows, the average S&P 500 stock has actually gotten “cheaper” over the last decade). Narratives may set the market’s mood, but earnings drive long-term returns.  

3. Diversify

While earnings remain a tailwind, one headwind to keep an eye on is concentration. The 10 biggest stocks account for ~40% of the S&P 500 weight, and the semiconductor industry alone now makes up one-fifth of the index. In such a world, proactive diversification takes on a new level of importance. We wrote further on the idea for our clients here.  

4. Themes

In a recent report, PwC noted that 21% of U.S. households now include a GLP-1 user, up from just 9% last year. Grocery spending per household is down 5.5%, including steep declines on sugary drinks and alcohol, while apparel spending has been shown to jump nearly 10% after 6-8 months on the drugs. It’s important to remember that the world is rarely transformed by a single theme. The market's focus on AI is more than logical, but investors should avoid mistaking the biggest story for the only story. Because just as AI is altering the digital world, GLP-1s are rewriting the physical one.

5. On this day

in 1998, Broadcast.com went public and rose 250% in its first day of trading, a record at the time. It’s a classic dot-com bubble parable – a revolutionary idea (streaming video on the web), a massive valuation for a money-losing company, and a disastrous acquisition at peak hype. The story is useful for investors today, reminding us that while markets can often correctly identify a game-changing technology, valuation and execution still win the day.  

Disclosures

This is not a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Market and economic statistics, unless otherwise cited, are from data provider FactSet.

This report does not provide recipients with information or advice that is sufficient on which to base an investment decision.  This report does not take into account the specific investment objectives, financial situation, or need of any particular client and may not be suitable for all types of investors. Recipients should not consider the contents of this report as a single factor in making an investment decision. Additional fundamental and other analyses would be required to make an investment decision about any individual security identified in this report.

For investment advice specific to your situation, or for additional information, please contact your Baird Financial Advisor and/or your tax or legal advisor.

Past performance is not indicative of future results and diversification does not ensure a profit or protect against loss. All investments carry some level of risk, including loss of principal. An investment cannot be made directly in an index.

Copyright 2026 Robert W. Baird & Co. Incorporated.

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