1. Changes to Research

2. AI Theme Overview

3. Risks to the AI Cycle

4. Pass/Fail Screen for AI Universe

Changes to Research

I’ve decided to start publishing my research on a daily basis. Each day will have a specific focus:

1. Monday: The Week Ahead - Potential market-moving catalysts (news, earnings, data, etc).

2. Tuesday: Macro Watch - Macro themes that are driving the market.

3. Wednesday: Sector Watch - Sector rotation, leadership, and where the next opportunities may emerge.

4. Thursday: AI Model Update - An update on my AI-themed model.

5. Friday: The 30,000 Foot View - An opinion/observation piece on the themes driving the market/economy.

Each day I will also be including the names within my AI Universe (these are the companies that are involved in the AI theme) that pass or fail my screen. These are not just technology companies, but companies across various sectors that are benefiting from the growth in AI.

The AI Model: Overview

At ARTAIS Capital, I manage a model that is based on the AI Theme. In the coming weeks, I will walk you through the theme, the signals I use, and how I manage risk, plus updates/observations of the model.

The concept of the strategy is to participate in the growth of AI while actively managing risk.

Based on my research and the research of others, the opportunity is immense, potentially adding trillions to US GDP:

The growth of AI is predicted to come in phases:

…and I believe we are still in the very early stages of growth, as most users are still using AI chatbots and not fully utilizing AI agents.

As someone who was around during the tech boom of the 1990s, I find that where we are in the AI cycle reminds me of when AOL started sending free disks to almost everyone in the country.

Currently, companies like Anthropic, OpenAI, and others are using the app stores to send out the equivalent of these free disks.

However, AOL wasn’t the internet. It was just a portal. During this time, very few people were on the internet and taking advantage of the vast resources of the World Wide Web.

I argue that consumers today are on the equivalent of AOL.

Which puts us pretty early in the AI cycle:

The Risks

You may be saying, “John, what about inflation, oil, the elections, etc and etc…?”

Read more

1. Changes to Research

2. Sector Rotation

3. Sector Bell Curve

4. Pass/Fail Screen for the 11 sectors of the S&P 500 index

5. Pass/Fail Screen for AI Universe

Changes to Research

I’ve decided to start publishing my research on a daily basis. Each day will have a specific focus:

1. Monday: The Week Ahead - Potential market-moving catalysts (news, earnings, data, etc).

2. Tuesday: Macro Watch - Macro themes that are driving the market.

3. Wednesday: Sector Watch - Sector rotation, leadership, and where the next opportunities may emerge.

4. Thursday: AI Model Update - An update on my AI themed model.

5. Friday: The 30,000 Foot View - An opinion/observation piece on the themes driving the market/economy.

Each day I will also be including the names within my AI Universe (these are the companies that are involved in the AI theme) that pass or fail my screen. These are not just technology companies, but companies across various sectors that are benefiting from the growth in AI.

Sector Rotation

In yesterday’s Macro report, I discussed the narrowing breadth of the market.

As the S&P 500 index is rising, the number of stocks within the index that are trading below their 21, 50 and 200 day moving averages has been rising:

S&P 500 Breadth is showing an increasing number of stocks trading below their respective 21, 50, and 200 day moving averages

This is occurring due to the rotation back into tech stocks, which represent the largest weighting within the S&P 500.

So, even though more and more stocks are declining, the tech sector is so large that it has allowed the index to rise.

Below is a Relative Rotation Graph (RRG) of the 11 sectors that make up the S&P 500 index:

Typically, RRGs rotate in a clockwise fashion. The green, upper right quadrant represents sectors that have the strongest positive momentum and relative strength vs the index itself.

Currently, the two strongest sectors are Communications and Technology, with Technology showing the strongest positive momentum. These two sectors represent over 40% of the index, which is why we are still seeing the S&P 500 rising higher.

Can tech keep pushing higher?

Read more

1. Changes to Research

2. Macro Update & Sector Screen

3. Pass/Fail Screen for AI Universe

Changes to Research

I’ve decided to start publishing my research on a daily basis. Each day will have a specific focus:

1. Monday: The Week Ahead - Potential market-moving catalysts (news, earnings, data, etc).

2. Tuesday: Macro Watch - Macro themes that are driving the market.

3. Wednesday: Sector Watch - Sector rotation, leadership, and where the next opportunities may emerge.

4. Thursday: AI Model Update - An update on my AI themed model.

5. Friday: The 30,000 Foot View - An opinion/observation piece on the themes driving the market/economy.

Each day I will also be including the names within my AI Universe (these are the companies that are involved in the AI theme) that pass or fail my screen. These are not just technology companies, but companies across various sectors that are benefiting from the growth in AI.

Macro Update

Despite weakening market breadth, which I will discuss in a moment, the short, intermediate, and long term trends of the S&P 500 index are all positive:

Current Bull/Bear Trend for the S&P 500 Index

Taking a look at the Relative Rotation Graph (RRG) of the broad indices, we can see a very different picture emerging compared to a few months ago.

After a summer that favored low-beta and value names (and energy due to the Iran conflict), the market is starting to refocus on the large cap, higher-beta areas.

Large cap growth stocks and the tech-heavy QQQ continue to see improving momentum and relative strength vs the S&P 500 index as the market is starting to refocus on the AI trade AND getting ready for the 4th quarter of a midterm election year, which has been very strong in the past.

Average 4th quarter S&P 500 return since 1960

Data source: Optuma

This occurs as investors start to position themselves for the year following a midterm election, which has historically been the strongest of the 4 year election cycle.

Well, what about market breadth?

Read more

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into what I am seeing.

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

At a Glance:

Market regime: Risk On

The Call - Pay Attention to Market Rotation:

In last week’s Signal & Noise report, I discussed the rotation I was seeing within the AI theme.

This rotation is becoming more visible as the market rotates away from the “oil” story to the “AI growth” story.

S&P 500 Index: Market Breadth and Sector Weighting

Breadth for the S&P 500 index continues to drop, meaning the number of stocks within the index that are trading above their respected 50 day and 200 day moving averages is declining.

A decline in market breadth doesn’t always mean that the market is dropping.

As I’ve mentioned before, the S&P 500 index is weighted by market capitalization, meaning: (number of shares traded x current stock price) = market capitalization. The larger the capitalization, the larger the weighting it has within the index.

NVIDA vs Valero Energy

For example, as of September 2026, NVIDIA (NVDA) has 24,286,000,000 shares of stock outstanding (available for trading). If the price of the stock is $225.73 per share, the market cap of NVDA is $5.450 trillion.

Now compare NVDA to Valero Energy (VLO):

Shares available: 298,000,000 (a significantly smaller amount than NVDA)

Stock Price: $382.85

Market Cap: $110.23 billion

Within the S&P 500 index, NVDA gets a larger weighting than VLO.

Why does this matter? Well, because of this methodology, more popular companies can issue more shares and not have their price negatively impacted (think supply vs demand).

As a result, the index is more influenced by sectors that have a larger market cap, like the technology sector:

Note the difference: Technology represents approximately 38% of the index, while energy represents 3.5%.

So for a company like Valero, whose stock has risen over 130% year to date (NVDA is up 21%), the impact on the index is extremely small due to Valero’s small representation within the index.

The methodology of the weighting of the index is why the S&P 500 index has not significantly declined. Despite more and more stocks within the index declining, the technology sector is keeping the index from declining.

Rotation Back to Tech?

Tech is starting to outperform the S&P 500 index again

For example, looking at the Relative Rotation Graph (RRG) of the sectors that make up the index (I added SOXX and SMH to represent the semiconductor sub-sector), we can see a rotation back into the more aggressive/higher beta tech sector and away from lower beta value names.

So the concern is not about the breadth of the market, but whether tech will be able to support the market.

Currently, the tech sector (I’m using the XLK ETF as a proxy) is stuck in a triangle pattern (this is the “fancy” name we technical analysts like to use):

This pattern indicates indecisiveness by traders. As a result, traders will position themselves on both sides, waiting for a breakout or a breakdown.

The side that is wrong will need to unwind their trade, which pushes the price higher/lower even faster and more aggressively.

Here is an example of how this typically works: If a trader believes the pattern will lead to lower prices, they may decide to short the tech sector.

Short selling is a trading strategy in which a trader aims to profit from a decline in a security’s price by borrowing shares and selling them in the hopes that the stock price will eventually fall, enabling them to buy the shares back for less money.

-Investopedia

If they are wrong, they will want to limit their loss by closing their trade. To do this, they will need to buy the stock back.

This adds more buyers (remember supply vs demand) and pushes the price even higher.

For now, keep an eye on tech stocks to watch for a breakout or breakdown.

The section below is for paid subscribers:

1. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

2. Sector Watch - Which sectors pass/fail the screening process.

3. Current Screen - Which stocks pass the screening process.

4. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

Under The Hood:

Read more

We discussed NAAIM (The National Association of Active Investment Managers), the NAAIM Exposure Index, the mindset of managing money, and the growth cycle of AI and where we are now in that cycle.

Watch the interview:

Introduction and the NAAIM Exposure Index (0:13)

Ryan Redfern: Welcome, everyone, to NAAIM Confidential. I’m this week’s host, Ryan Redfern. Today we have John Rothe, CMT, with ARTAIS Capital Management. John, awesome to see you again. We did this a couple of years ago, and it’s great to have you back.

John Rothe: It’s awesome being back. I love chatting markets with you, and we always have a good time. Thanks for having me back on — I’m looking forward to this.

Ryan: Absolutely. I know our NAAIM Exposure Index is now behind a paywall, so we’re not going to show it, but I will say the number this week is about 86. John, you’re a contributor. Where are you at?

(Current ARTAIS clients, please reach out to me for a free paid subscription)

John: I’m right there. I put in about 80%, and a lot of that is the tech focus of what’s going on right now. I think there’s a little rotation coming in from the summer months, when things were focused not on tech but on the value names. Oil has obviously been a big story, along with the energy sector and what’s going on overseas. The fourth quarter, especially after elections, tends to be a really strong period for the market. So I think you’re starting to see some rotation — people reallocating their portfolios, looking for opportunities, and taking profits off the table in areas like energy that did well over the summer. That may be showing up in indexes like the NAAIM Exposure Index, where people are caught mid-rotation as they position themselves for the election and for the fourth-quarter pop we’re hopefully going to see again this year.

Ryan: I would say the same. Is the model you report to capped at 100% invested, or do you ever use leverage beyond that?

John: No, it’s always up to 100%. I’m focused on the AI space within the model right now, so it’s aggressive as is. I’m not looking to add leverage on top of that, because some of those names can move quickly and I don’t want to be caught on the wrong side of a trade. We still need to manage risk as money managers.

Ryan: Right, and that’s a high-beta space relative to everything else. It’s funny — I’m actually at 120% right now, and I can go to 200%, but a lot of that is large-cap value, which is really low volatility, and I’ve got some market-neutral positions in there. So I have exposure, but it’s very muted, low-beta exposure. My number may be high, but my risk might not even be as high as a high-beta 80%, depending on the portfolio.

John: It’s interesting getting that data. I’d love one day to look at what’s behind the scenes. I think it was Whitney Ribbons you had on, where you were talking about how everybody is allocated differently in their models. You might have somebody like you at 120% who is actually very conservative, taking advantage of value names, while somebody else might be hedged but at 100%. It’s a different reading, so you have to understand what’s in that index. Back when the index was public, I’d see a lot of people comment, “These people are on the wrong side of the market.” But when you understand there’s a lot of hedging going on and these portfolios are actively managed, it’s not as aggressive as people think.

It’s interesting to watch the ebbs and flows of the index — where the extremes are and how NAAIM members take advantage of different trends in the market. I love to see it sit above 90% for a long period as the market goes up and up, because it’s almost a confirmation. And the second those numbers drop, you know people are rotating and something is going on within other managers’ models — they’re starting to see something a little different. So I approach that data by looking at the changes rather than the values themselves.

Ryan: I love that. That’s one of my favorite things to talk about when I have guests on who contribute to that number, because how we all come at it is so different. When you get the generic “the managers are all over-allocated right now” take, it’s like — maybe? It’s not really telling the whole picture. It’s a really interesting picture, but it’s not the whole thing.

John: It’s a cool tool, and it’s cool to see and participate in, but you need to understand the data.

Why NAAIM Matters (4:47)

Ryan: Well, thanks for contributing to it and getting your angle in there.

John: I just love NAAIM in general. Like we were talking about before the show, it’s a great group of people to talk markets and talk shop with. It’s such a great organization for connecting with people outside your immediate geographic area and seeing how they view things. Everybody seems very willing to share. It’s not a closed-off environment where someone says, “I have this secret sauce and I’m not going to share it.” It’s more research-based — people focused on the research aspect rather than trying to take down a competitor. They’ll say, “I’ve been researching this for two years, and this is what I found — let me share it at the conference.” I love the organization.

Ryan: Absolutely. And personally, I’ve shared some of my best stuff and people have been like, “Yeah, that’s okay.” We all have different ways we approach the market and think. We’re still dealing with our own mentality and biases. We could all have the same strategy and still trade it differently, which I think is fascinating.

Mindset and Managing Other People’s Money (5:55)

John: Mindset is such a big key in this industry when you’re managing other people’s money. I sometimes talk to young guys coming into the industry about how important mindset is. To take a step back: there’s a sports psychologist, Dr. Gio Valiante, who coached a lot of professional golfers on the PGA Tour. Because of that work, somebody saw him and invited him to Steve Cohen’s house — the legendary hedge fund manager — when Cohen created Point72, to do mindset work with his portfolio managers. The big takeaway was ego versus mastery.

Think about a golfer. When you’re a kid, you love hitting the ball. You might be out there in the rain, like the kid on the basketball court shooting baskets in the rain — you just lose yourself in it. Then once money gets involved and you start thinking about people watching you, you start worrying about outward appearance, and it messes up your game. Before we moved out to the beach, we lived by a golf course that had this gorgeous hole overlooking a river with a deep valley. If you love golf, you could go out there and just smack the ball — it was such a cool hole. But it was right by the patio where everybody ate. So if you were really into golf, you might think, “My wife is over there telling everybody how much I’ve been playing, my friends are there, people are going to laugh if I mishit the ball.” A lot of people would mess up, and you could see the difference because that mentality got in there. The little kids would just go up and smack the ball because they didn’t care. They were having fun.

The same applies to investing. If you’re worried about what your clients are going to think — “If I take this position and lose money, or I’m on a losing streak where my last couple of trades haven’t been profitable, I’m worried about getting yelled at” — it changes how you manage. As a result, a lot of people run their own portfolios differently from their clients’ portfolios. Their best ideas are in their own accounts, where they think, “I should be buying this right now because it’s on sale.” Whereas if you’re focused on what your clients are thinking instead of making money, you might say, “I’m not going to take this, because what if it doesn’t work out and I get yelled at?”

I think a lot of that comes with being young. As you get older, you realize you need to focus on the research and build a mastery-level skill set — understand the markets, try to make as much money for your clients as possible, but rather than worrying about getting yelled at, educate your clients about what you’re doing. When I talk to young guys about this, they look at me funny: “I’m just here to make a lot of money.” But that’s again why I like the NAAIM community so much. A lot of the members are about mastery and the research side of things rather than a “look at me, look what I’ve done” attitude. There’s a big mindset component to this business.

Ryan: I find personally that instead of trying to have crazy performance, I’m trying to have the best risk-adjusted returns. How much can I make with as little risk as possible? I tell people we’re not going to be impressive when the market’s great, but when the market stinks, you’re going to love what we do.

Explaining Active Management: The Farmers Market Analogy (9:32)

John: When I talk to people about active management, I explain it like a farmers market. I grew up in an area that had a year-round farmers market in a building with fixed counters — you could go in December for lunch and get sandwiches. It was really cool. So I say, imagine you can take ownership in that farmers market. That’s like buying the index. Inside, you have all these little vendors and stands. If you want to take a deeper dive, you say, “I come in and I notice there are lines at all these other shops. Instead of investing in the whole market, I’m going to put my money where the lines are,” or use some kind of analysis to figure out where the trends are. That’s active management.

That’s the way I approach it and the way I explain it, and a light bulb clicks on. It’s not so much “your method is right, your method is wrong.” It’s “I see — you’re getting more into it, analyzing what’s going on, trying to take advantage of the winners and keep the losers out.” That makes sense to a lot more people when you explain how the market works. That’s where people like us on the active management side can really provide value, because you’re seeing those trends before the bigger marketplace sees them.

Ryan: Absolutely. And I think we can have opposite opinions on a stock, a sector, whatever, and both be right depending on the time frame. If I say I think tech is going to stink this week, I might be right, but you might say it’s going to be amazing three years from now, and we can both be right. That’s what I find funny about Twitter. You see people arguing about it, but if your time frames don’t match, you’re arguing about different things.

John: People come up with the immediate knee-jerk reaction. Look at some of the stuff Elon is doing with SpaceX. People love him or hate him, but he’ll say, “I want to do this,” and someone will say, “You can’t do that. That’s impossible.” Well, he’s got a hundred engineers working day and night to figure it out. Have you spent that time trying to figure it out, or are you just repeating something you heard? It’s the same thing with markets. If you’re really researching it and diving in and you disagree with me, then yes, I want to look at your research — maybe I missed something, maybe you have a different take. But if you’re just on Twitter saying, “No, you’re wrong, that’s not what’s going to happen,” you haven’t done any research to back it up. Social media cracks me up. It’s entertaining, but…

The Rebrand: From Riverbend to ARTAIS (12:18)

Ryan: I wanted to dive into something. You did a firm name change — really a whole change. Generally, when I see people do that, it’s like the worst idea I’ve ever seen. The new name is terrible, or they got merged, which is never good for companies. So when I see a name change, my reaction is usually, “Ooh, what’s wrong?” But watching you do it, and what you’ve changed to, has been fantastic. It’s one of the rare cases where I think, “This guy did it right.” I’d love to know your process. Why did you do it, how did you do it, and how did you get to that point?

John: It’s been a multi-stage process over the last couple of years, and it really started during COVID. I got into this business in the ‘90s, and during that time there was a period where people were getting away from stock trading and focusing more on financial planning. There were a couple of older guys in my office who took a liking to me — these were guys who had survived the ‘70s. If you look at the markets in the ‘70s, they were really volatile. If you just bought and held, you didn’t make any money, but there were huge opportunities in there. The guys who survived the ‘70s had found something that worked, and they were all using some form of technical analysis. They’d pull me in and say, “Look at this chart — this is why I’m doing this.” And they absolutely crushed it during the ‘90s, with all the volatility from the tech sector, because they were using those charts.

So I initially started off like that, and then I slowly drank the industry Kool-Aid: pick a fixed allocation for somebody, hold on to it, and focus on financial planning. That’s where the industry turned, because that’s where a firm could really maximize profits.

During COVID — and I turned 50 last year, so maybe this was the early part of a midlife crisis — I started thinking, “I’m really not that happy with what I’m doing right now business-wise.” I didn’t like the way my business was structured. I thought about whether I should retire early, do something else, or work part-time. Talking to my wife, I said, “I really like the research aspect of this.” That has always been the thing I lose myself in. Friday night comes along, I’m sitting on the couch, and what am I doing? Looking at stock charts and data. That’s what I really like to do.

So I decided to make my firm a research-based firm that also manages money, rather than the financial services firm I had before. That’s when I went and got my CMT. I was already using technical analysis, but I wanted to know the broad base of everything, so I could go down different rabbit holes and learn how things are constructed. I slowly transformed the firm to where I wanted it to be — focused on research — and that’s where the name change came from too. I was rebranding everything and taking a very different approach.

From the outside, these firms all look pretty much the same. But in my day-to-day work, 90% of my day is now spent on research — looking at models, looking at charts. I go through hundreds and hundreds of charts a day. I’m not worried about whether so-and-so gets their dividend check next quarter to hit their retirement numbers. I don’t do any financial planning at all.

I’ve also dwindled my models down to just one. What I found was that with a couple of different models, clients were never really happy: “I should have been in that higher model that made so much more money,” or “This one’s pulling back — I should be in a more conservative model.” So I said, my best ideas are in this one model. This is what I’m doing on a Friday night. This is the model I’m really studying. Let me just go there with my best ideas, and for the people who understand it, let’s make as much money as we can — with a risk-managed approach so we don’t blow ourselves up.

The Technology Background Behind the Strategy (16:42)

John: I’ve always been interested in technology. I’ve been a tinkerer — I’ve always taken things apart. I probably should have been an engineer; my dad is an engineer. Before we moved down to the beach during COVID, we lived in Northern Virginia, which is a huge tech area. There are a lot of data centers there, and AOL started there. A lot of my friends and neighbors are tech guys who understand this stuff. So before AI became popular, they were talking about it in 2018, 2019, 2020. I started picking up on it and realizing this was starting to look like the internet boom — one of those major transformative events. There were white papers that came out in 2018 about how large language models might work, and there was a very different approach to how people were building AI models.

That’s when a light bulb went off, and it brought me to the conclusion during COVID that I needed to focus on what I really like doing — research — combined with tech, which I understand. That whole process took a couple of years, and almost the last phase was renaming and rebranding the firm. Now I’m working on research projects. I have a Substack where I publish research, and I’ve spent the summer figuring out how I want it structured. After the summer is over, I’m going to launch full speed ahead and share that research. For the people who understand it and want to come on board — “By the way, you also manage a model based on this research” — they can do that too. It’s a very different approach from what a lot of us learned over the last 10 to 15 years about managing money, but it’s something I’m very interested in, and that’s what led to the whole rebranding.

Ryan: Nice. So do the letters stand for something?

John: It stands for Absolute Returns Through Adaptive Investment Strategy. I have to give my wife credit for that, because she’s the one who thought of it. I thought it was a cool name, and no one is going to copy it. We were Riverbend Investment Management before, and there are a thousand Riverbend Investment Managements in the world. This distinguishes us a little better and shows what we’re doing.

Ryan: I love it. It’s very unique and different. You’re right — Riverbend was more generic. It wasn’t bad, but it was generic. This is very precise. I think you did an awesome job rebranding, specifically for the path you were heading into.

The AI Thesis: We’re in the AOL Era (19:42)

Ryan: You gave me some slides. We normally don’t do the presentation thing as much as we used to, but if somebody has a good slide, let’s look at it. This is the one you were talking about — AOL consumers online.

John: This is the basis of the thesis for the model I’m using right now. When we go back to the ‘90s and compare where we are now to where we were with internet growth, we’re in that early part where AOL was just starting to appear. Remember, they used to send out those little discs everywhere — you’d get one in the mail all the time. “Sign up for AOL for free.” A lot of people were on AOL, but they weren’t really on the internet. They were using AOL as a portal, but they never really got online. There wasn’t a lot of content, and you didn’t really have browsers the way you do now. If you look at the stats, in 1996 the people who were AOL-only were online for less than 30 minutes a month. In 2000, only 22% of people had bought anything online. It was a very different world from where we are right now, which shows you the growth potential for AI.

People say, “Everyone’s using AI chatbots — we’re obviously in a bubble.” Yes, we probably are in a bubble, but I think we’re at the very beginning of it. When you make the comparison, these chatbots are basically AOL. You’re not really utilizing the full power of AI agents. The app store apps are basically the AOL discs — they’re giving people free access, and people are on the AOL platform, but they’re not building anything with it.

When I talk to people, I tell them I’ve built out multiple agents. They used to be like dumb interns, then they got to be smarter interns, and now they’re like junior associates. They keep getting smarter and smarter. I have them work on research, build things for me, and analyze data, and it all runs automatically. I come in in the morning and it’s like having a junior associate who worked all night — like on Wall Street, where the poor kid has been up all night building reports. I have all this data and can get right to research instead of organizing everything. They’re getting more and more powerful. But when I bring that up to people, they look at me and say, “I can do that?” They had no idea, because they’ve never explored it. It’s the same conversation as back then: “Oh, you can get online with it.” “I am online — I’m on AOL.” “No, there’s this whole other thing behind it.”

Ryan: And this next slide shows where we are on the timeline.

John: We’re at about 1992 or 1993 right now with AI. Eventually it’s going to get bigger and bigger and fit more into the consumer market. I remember reading articles in the ‘90s — Newsweek called it “the information superhighway,” then it became “surfing the web” and “getting online,” and eventually it was “Google” — you Google your name. Today, you don’t say “I ChatGPT’d myself” or “I Claude’d myself.” There’s no consumer marketing for it yet. They haven’t made that transition, because it’s built for the geeks right now — for the nerds who will deep-dive into this stuff. They don’t need to market to us, because we understand the tech. The system isn’t big enough yet to handle the conversion to the consumer market, because they’re still building everything out.

That’s how I view it: we’re at the very beginning stages. There’s a huge opportunity in this transformation, and there’s going to be a lot of money made. I remember this period. It’s when I entered the industry, and it was a lot of fun. A lot of people made a lot of money because things seemed to go up every day. As somebody who loves looking at charts and taking a research view of the stock market, it’s really cool to see it happen again — and to participate from the start instead of coming into the industry halfway through and catching the tail end. I’m excited for it. That’s the background of the thesis I built for the strategy we’re moving forward with.

Dealing with AI Hallucinations (24:19)

Ryan: How do you deal with AI hallucinations, which still come and go? I’ve had clients come to us with financial planning questions where the AI used 2018 tax numbers, which messes up your whole assumption. It’s still not perfect. So how do you handle that?

John: Two ways. First, I look at it as a junior associate. It’s gotten smarter and smarter, but it’s still somebody who doesn’t fully understand the last 10% — the details. So you still need to review everything. There are going to be some mistakes, but it’s done 90% of the work, so I just need to go in and review it.

The other thing is persistent agents — one is called Hermes, for example. What I have set up is a group of agents that are my employees and do things for me, and then almost a master agent, like Jarvis from Iron Man, that oversees everything. It chats back and forth in Slack, verifies things, and fact-checks. It will pull out the mistakes and say, “We fact-checked this, and this agent is making stuff up again.” Then I can go work on that agent and figure out why it’s going into the weeds. The agents do get a little lazy, and I think some of that may be programming by these companies to preserve power and energy, where they take shortcuts here and there.

So yes, it is a problem, and it’s something people need to be aware of. Sometimes people will say, “I pulled this up on ChatGPT and it said this,” and it’s obviously wrong because it pulled from some random website. That’s a big problem too. Because these agents are searching online, there are ways to use search engine optimization for certain search terms. You can start a website, put completely wrong information on it, and set it up so that Claude thinks, “This guy’s an expert, let me use this data.” So you need to look under the hood. I always tell it to give me sources so I can go verify things.

But if you have ten of these things doing 90% of your work and you just need to review it, it’s a pretty interesting way to get a lot more done and be more productive — without dealing with actual employees you have to pay, the drama, all of that. They just work 24/7. It’s very cool. But you have to be aware of how these things work, which again is why I think they aren’t marketing to the public yet — only the nerds and geeks like us understand what’s going on.

Ryan: It’s funny you say that. I’ve built a whole dashboard we use to manage our things and keep tabs on data. I see myself phasing out of a lot of the charting platforms I use and just going to my own, which is kind of crazy.

John: I’ve done the same thing. I’m using Render to set things up. It gives me the signals, the things to watch out for — everything in one spot, instead of going through all these charts and software that gets slow when you have everything open. And you can utilize the power of a data center that’s much more powerful than your desktop PC and speed through it. It’s very cool to build tools like that. But again, most people see it and say, “Wow, I didn’t know you could do this.”

Ryan: To your other point, I find that after a couple of hours of building, it gets tired and lazy.

John: It’s the weirdest thing. “Okay, we’re done for today.”

NAAIM Events and a Favorite Quote (28:23)

Ryan: I feel like we could go for another hour. This was so much fun. We have our NAAIM Outlook conference coming up October 26th and 27th in Dallas. I don’t know if you’re going to be there. Have we ever met in person? I feel like I’ve known you forever.

John: I’ve been so busy with this transformation that I haven’t had the chance to make a lot of these conferences, but now I’m trying to get more involved again, because there are so many good ideas at them. NAAIM is one of those organizations where people are so willing to share what they find. There’s so much useful information out there. I’m amazed more people aren’t joining, because there’s so much data and research within the organization.

Ryan: Absolutely. I didn’t prep you on this, but do you have a favorite investment quote?

John: In the theme of everything we’ve discussed: “History doesn’t repeat, but it rhymes.” That’s the theme of what’s going on with tech right now. The world is going through another cycle of similar stuff.

How to Find John (29:45)

Ryan: Love it. How does somebody find you if they want to hear about your strategies?

John: Type in johnrothe.com and it will take you right to my Substack, where I put a lot of research. You can also go to artaiscapital.com. I’m still tweaking that website so I can put some of the research there as well. Those are the two main places I post. I’m not that active on Twitter anymore, for the same reasons we talked about — the research guys are more on Substack.

Ryan: That’s true, that’s where I’m seeing things go as well. Well, thanks for being here today. I love this — I’d do it every day if I could.

John: It’s a good time, just like our NAAIM Shared Thursdays — the last Thursday of the month. We talk on there quite a bit. That’s another great resource.

Ryan: That’s an amazing resource. More people should take advantage of it. All right, we’re at time. John Rothe, great to see you again. Always great talking to you. We’ll see you all next time.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

Disclosure: ARTAIS Capital Management, LLC is a registered investment adviser. This publication provides impersonal investment advice based on systematic, rules-based screening models. It is not tailored to any individual subscriber’s financial situation, investment objectives, or risk tolerance. Subscribing to this newsletter does not create a personalized advisory relationship.

The screening signals, entry prices, and exit levels presented are generated by quantitative models and are provided for informational purposes. They are not recommendations to buy or sell any specific security. Subscribers are solely responsible for their own investment decisions, including whether any signal is appropriate for their circumstances.

Past performance of any screening model or signal is not indicative of future results. All investing involves risk, including possible loss of principal. No representation is being made that any subscriber will or is likely to achieve profits or losses similar to those discussed.

The principal of ARTAIS Capital Management, LLC and his clients may or may not hold positions in securities discussed in this publication. When overlap exists with client portfolios, client trades are executed prior to publication.

© 2026 ARTAIS Capital Management.

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into what I am seeing.

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

At a Glance

Market regime: Risk On

The Call - The AI Trade

It is starting to look like the AI trade is about to become the main focus of investors again.

After a choppy summer, where a lot of the focus was not on AI growth, but on oil prices, inflation, and what the Fed will do next.

As a result, the AI trade was mostly ignored and avoided by investors.

However, when we look at the rotation of the various components that make up the AI universe (these are companies that will directly benefit from the buildout and growth of the AI space), the setup for a rotation back into the AI theme is beginning to form.

Below is a Relative Rotation Graph (RRG) of components (using ETFs as proxies) that make up the AI theme:

You will notice that the leading edge of the rotation is in the lower-left, “lagging” quadrant.

I get asked, “Shouldn’t we avoid anything that is lagging?”

Not necessarily. As I have written in the past, RRGs typically rotate in a clockwise fashion, from weakness to strength and back.

To help illustrate this concept, here is the above RRG chart of the AI theme in rotation:

Based on my research (and others have done similar research), the best opportunities occur in the lower left, lagging quadrant. (Think: Buy Low, Sell High)

Taking a closer look at the individual components in the AI theme can further help in distinguishing the areas that are starting to show improvement; I like to look at selling exhaustion.

Read more

If we zoom in on the chart, we can see that the Communications sector has been stuck in a sideways trading pattern since late September of last year.

During this time, momentum declined, and the sector relatively underperformed VBINX (which I am using as a proxy for a 60/40 index).

Currently, the sector is still trading in this range bound, sideways pattern, but as momentum continues to improve, we may see the sector finally break out to new highs.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

Under the Hood of the Communications Sector

The XLC ETF is designed to mimic the Communications sector’s index. As of August 26th, the weighting of stocks within the ETF and the index are almost exactly the same.

This allows us to use XLC as a proxy for the sector and as a trading vehicle.

source: State Street Investment Management

Since last September, with the exception of Verizon, Warner Bros. Discovery, and Google (where it can be argued the price is rising due to the AI trade), the top 10 has underperformed the market.

Since these 10 companies represent nearly 70% of the index, let’s take a closer look to see if we can gather more information about the recent changes in momentum.

Relative Rotation Graphs (RRG) for the Communications Sector

I am a big fan of Relative Rotation Graphs (RRG), as they help visualize the rotation between strength and weakness of the market, or in this case, a sector.

Currently, the majority of the top 10 is located in the bottom left hand quadrant. This is known as the “lagging” quadrant and is where we will find the weakest momentum and relative strength.

Naturally, we want to avoid anything in this quadrant, right?

Not necessarily. My own studies, as well as those done by others, have shown that since RRGs typically rotate in a clockwise fashion, the “lagging” quadrant may actually provide the opportunity to do what we have all been taught to do: “buy low, sell high.”

As I highlighted in this post: “Using Relative Rotation Graphs for Sector Selection”, Matthew Verdouw, CMT, CFTe, examined the probabilities of gain and the average annual return of each quadrant.

His research shows that the best performance comes from the lagging quadrant.

source: Buying Outperformers Is Too Late

By animating the RRG during the period of negative momentum, you can see the rotation of the majority of the top ten holdings in the index move from strength to weakness:

So, Where Does this Leave Us?

The Communications sector is still stuck in the same trading range it has been in since last September, and the majority of its largest holdings are sitting in the lagging quadrant. On the surface, that is not a chart most investors would want to own.

But that is exactly the point.

Momentum tends to turn before price does, and RRGs tend to rotate in a clockwise fashion. If the top 10 holdings begin to rotate out of the lagging quadrant and into the improving quadrant, the “buy low” portion of the equation may already be in place.

From here, there are three things I am watching: continued improvement in momentum on the XLC chart, rotation of the top 10 holdings from the lagging quadrant into the improving quadrant, and a breakout above the sideways range that has contained the sector for almost a year.

Of course, none of this is guaranteed. Sectors can sit in the lagging quadrant longer than we expect, and breakouts can fail. But when momentum starts to improve while price is still range-bound, that is usually when I start paying closer attention, not less.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

DISCLAIMER

This article is published by John Rothe, CMT, principal of ARTAIS Capital Management, LLC (“ARTAIS Capital”), a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The opinions expressed in this newsletter are for informational and educational purposes only and do not constitute investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services. All investments involve risk, including the possible loss of principal.

Any references to past performance, market data, or historical patterns are not indicative of future results. Forward-looking statements reflect the author’s current analysis and are subject to change without notice.

ARTAIS Capital Management, its principal, and/or its clients may hold positions in securities or asset classes discussed in this publication.

For personalized investment advice, please consult a qualified financial professional who can assess your individual circumstances.

NATURE OF THIS PUBLICATION: This screen represents the complete output of a systematic, rules-based quantitative methodology. It is published for informational and educational purposes only. It is NOT a model portfolio, NOT a recommended holdings list, and NOT personalized investment advice.

CONFLICTS OF INTEREST: ARTAIS Capital Management, its principal, and/or its clients may hold, buy, or sell any security listed in this publication at any time, without notice, and without regard to the publication schedule. Some securities appearing on this screen may also appear in ARTAIS client portfolios. Client portfolio decisions are made independently based on each client’s investment objectives, risk tolerance, time horizon, tax situation, and overall portfolio context. The appearance of a security on this screen does not mean it is held in any specific client account, nor does it mean it is suitable for any particular investor.

SUBSCRIBERS VS. CLIENTS: Paid subscribers receive this research for informational and educational purposes. ARTAIS clients receive personalized portfolio management under a written investment advisory agreement. This publication is not a substitute for individualized investment advice. If you are not an ARTAIS client and wish to receive personalized advice, please consult a qualified financial professional who can assess your individual circumstances.

PERFORMANCE: No performance data for this screen is published, calculated, or implied. Past inclusion of a security on this screen is not indicative of future results. All investments involve risk, including the possible loss of principal.

NO OBLIGATION TO UPDATE: Securities may be added to or removed from this screen at any time based on the methodology’s criteria. ARTAIS has no obligation to notify subscribers of changes between scheduled publications.

LARGE-CAP FOCUS: This screen evaluates securities with market capitalizations generally above $8 billion. This does not imply that large-cap securities are less risky or more suitable than other investments.

Do not buy or sell any security solely based on its appearance on or removal from this screen.

© 2026 ARTAIS Capital Management, LLC. All rights reserved.

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into what I am seeing.

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

At a Glance

Market regime: Risk On

The Call - Energy

Since the start of the year, the Energy sector has been one of the best performing sectors within the S&P 500 index. Year to date, the sector is up over 41%:

A lot of this growth was due to the buildout of the AI sector and the need for more power to drive the buildout of data centers.

Companies like Williams (WMB), Kinder Morgan (KMI), ONEOK (OKE), Baker Hughes (BKR), and EQT (EQT), just to name a few, saw their stock prices rise earlier in the year as the market focused on the AI buildout.

However, once the Iran conflict began, the market switched its focus from AI to oil, causing prices to decline and creating a very different dynamic in the AI focused energy components:

This change in dynamic also increased volatility in the sector itself:

The data is now suggesting a potential change to the trend. Below is a chart of XLE, representing the Energy Sector. It is overlaid with the DeMARK indicators, which show buying and selling exhaustion.

Read more

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into what I am seeing.

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

At a Glance

Market regime: Risk On

The Call

We are a little more than 50 trading days away from the US midterm elections. Historically, the market enters a bit of a lull as investors take a wait-and-see approach.

However, take note of the chart above. The periods when one party controls both the House and the Senate and loses one, like now (according to current political trends and predictions), tend to hold up better vs other years.

The really important part of the chart is what happens after the election. The 4th quarter of the year tends to see a strong performance from the stock market.

This strength continues into the following year, with “year 3” of the Presidential election cycle, which, since 1950, has been the strongest of the 4 year cycle.

Because of this cycle, I wouldn’t be surprised to see some consolidation and rebalancing of portfolios over the next few weeks, as investors start to position their portfolios for the 4th quarter and next year.

Under The Hood

Read more

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into what I am seeing

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

At a Glance

Market regime: Risk On

The Call

In last week’s report, I discussed the current rotation of the market and how the rotation was indicating a “risk on” environment.

This week, the rotation continues to favor “risk on” with the Tech and Consumer Discretionary sectors showing the greatest improvement in positive momentum.

If you are not familiar with Relative Rotation Graphs (RRG), they typically rotate clockwise. This allows us to see the rotation from “risk on” to “risk off” and back, in real time.

I track the following themes, and by placing these themes on an RRG, the rotation between risk on vs off becomes clearer:

(Current ARTAIS clients, please reach out to me for a free paid subscription)

The allocation of stocks within the ARTAIS Universe that pass my screen continues to expand (see below) and highlights the risk-on theme. However, Industrials and Materials are also showing strength.

The Industrial and Materials sectors have been participants in the AI growth theme, as these two sectors are necessary for the buildout of the data centers that are needed to support the growth in AI.

Current Sector weighting of ARTAIS names passing the screen

So from my viewpoint, the AI trade is back to the forefront for investors.

Part of this is being driven by the focus on CAPEX spending. The most recent earnings calls have been focused on how much the companies involved in AI are spending.

Some investors are getting worried about how this growth is being funded. Currently, hyperscalers (cloud/data center operators like Amazon, Alphabet, Oracle, Microsoft, etc.) are set to invest over $700 billion into AI computing in 2026 alone.

This funding has been labeled circular financing. Circular financing occurs when one company, like Nvidia, invests in an AI company. The AI company then turns around to buy semiconductor chips from Nvidia.

To help better explain this, I used Claude to give me an ELI5 (explain it to me like I am 5) version of how circular financing works:

Read more

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into what I am seeing

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

At a Glance

Market regime: Risk On

The Call

In last week’s report, I discussed the improving momentum in the Tech sector and how it was on the verge of turning positive.

This week, the momentum in the Tech sector has turned positive.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

Below is a Relative Rotation Graph (RRG) of the 11 sectors that make up the S&P 500 Index.

Currently, the rotation is showing improving momentum in tech stocks and is indicating we are entering back into a “risk on” rotation for US equities.

RRGs typically rotate in a clockwise direction. This allows us to see the rotation from “risk on” to “risk off” and back, in real time.

While I don’t have a magic crystal ball that tells me how long these conditions will last, I find it useful to look at the rotation of not just the sectors themselves, but the rotation of high vs low beta, value vs growth, and how overbought and oversold the areas of the market that investors typically label “offense vs defensive”.

To start, let’s take a look at the relationship between these “risk on” and “risk off” categories.

The below Relative Rotation Graph shows the rotation between high-beta vs low-volatility, growth vs value, and consumer discretionary vs consumer staples.

Why consumer discretionary vs consumer staples? Investors look at consumer’s behaviors and how their purchases affect earnings growth.

When a person feels good about the economy and their future job outlook, they tend to spend more on big-ticket items. Perhaps they upgrade their phone or buy a larger TV before football season starts.

When a person is worried about the economy, they tend to avoid these purchases. However, they still buy everyday necessities (staples), like groceries, toilet paper, and (hopefully) deodorant.

As a result, when markets are in a downtrend, many flock towards consumer staples, since the earning of these companies tend to be more stable during times of economic instability.

I’ve circled the “risk-on” asset classes in green and “risk-off” in red to highlight the improving momentum that favors the “risk-on” theme:

Read more

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into what I am seeing

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

At a Glance

Market regime: Cautious

The Call

For the past few weeks, I have been talking about the opportunity in Tech and the Semiconductor space.

However, the rotation from value back to growth has been slow, in part due to another wave of “disagreement” over opening the Strait of Hormuz, and waiting to hear what the Fed and its new Chair, Kevin Warsh, will say about inflation and interest rates.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

If we take a look at the Relative Rotation Graph (RRG) of the sectors within the S&P 500 (I’ve added SOXX and SMH to help track semiconductor stocks), the momentum of the Tech sector is on the verge of switching over to positive.

But investors are still hesitant. Similar to a person who is standing on the very edge of a diving board, hesitant to jump into the pool.

While we wait, there are already signs that some of the market is positioning itself for this (potential) next leg up.

Below is a Point and Figure (PnF) chart of the Bullish % Index of the Tech sector:

For those not familiar with PnF charts, they simply show price movement with time removed. Tom Dorsey, who built a research firm around Point and Figure, refers to the Xs and Os on the chart as offense and defense.

In other words, when the chart shows a column of Xs, the offense is on the field.

Bullish % Index charts show the percentage of stocks on a Point and Figure buy signal. These charts range from 0% to 100%. Anything below 30% is considered oversold, and anything above 70% is considered overbought.

So, in regard to the Tech sector, the offense just got back onto the field while the sector was in oversold territory.

As the Tech sector is the largest component of the S&P 500 index, a rise in the sector may help push the S&P 500 index to higher levels:

(Current ARTAIS clients, please reach out to me for a free paid subscription)

Under The Hood

Sector Watch

Current Sector weighting of ARTAIS names passing the screen

Read more

Next week is the July 28–29 FOMC meeting, and the market is doing something it hasn’t done in a while, pricing in a real chance the Fed raises rates instead of cutting or holding.

Currently, the CME’s FedWatch tool puts the odds of a 25-basis-point hike at roughly 35%. While the odds are still low, the back and forth is what I am focusing on.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

In mid June, the U.S. and Iran reached a preliminary agreement to reopen the Strait of Hormuz for shipping and extend the ceasefire. Oil prices dropped on this news.

Because of this, the inflation data showed that inflation was starting to cool.

For example, if we strip out food and energy costs, the CPI (consumer price index) has dropped to 2.6% and is heading towards the Fed’s stated target rate of 2%:

The general consensus became that higher oil prices during the conflict were temporarily pushing the data higher:

So why are we even talking about raising rates right now?

Simply, energy and food.

Rising gas prices and food costs are impacting the consumer, which means they have less money to spend.

Since the US is a consumer-based economy, this means less profit for non-energy and non-food companies. Which can translate into layoffs and less jobs.

In addition, the closure of the Strait of Hormuz impacts the transportation of non-oil necessities like fertilizer.

And historically, when gas prices rise, so does the price of fertilizer, and therefore food costs rise:

But if the Fed tightens, this can also slow down the economy by raising borrowing costs and making expansion more difficult.

So the Fed, in my opinion, is stuck.

In fact, if we look at the expectation for future interest rate levels, we can see the Fed “flip-flopping” back and forth. (Yes, flip-flopping is my technical term for this):

The plots in the above chart show the Fed raising rates in 2026, then immediately dropping rates to a level lower than what they currently are.

As any long-time investor will tell you, the Fed has historically waited too long, and sometimes overreacts, on its moves. Most recently, calling inflation transitory in 2021 and 2022 and failing to take action.

My base case remains that the Fed should not raise rates, because they have proven in the past to not be nimble enough for the “flip-flop” scenario.

Especially if they think they can time geopolitical events, like the war in Iran.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

DISCLAIMER

This article is published by John Rothe, CMT, principal of ARTAIS Capital Management, LLC (“ARTAIS Capital”), a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The opinions expressed in this newsletter are for informational and educational purposes only and do not constitute investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services. All investments involve risk, including the possible loss of principal.

Any references to past performance, market data, or historical patterns are not indicative of future results. Forward-looking statements reflect the author’s current analysis and are subject to change without notice.

ARTAIS Capital Management, its principal, and/or its clients may hold positions in securities or asset classes discussed in this publication.

For personalized investment advice, please consult a qualified financial professional who can assess your individual circumstances.

NATURE OF THIS PUBLICATION: This screen represents the complete output of a systematic, rules-based quantitative methodology. It is published for informational and educational purposes only. It is NOT a model portfolio, NOT a recommended holdings list, and NOT personalized investment advice.

CONFLICTS OF INTEREST: ARTAIS Capital Management, its principal, and/or its clients may hold, buy, or sell any security listed in this publication at any time, without notice, and without regard to the publication schedule. Some securities appearing on this screen may also appear in ARTAIS client portfolios. Client portfolio decisions are made independently based on each client’s investment objectives, risk tolerance, time horizon, tax situation, and overall portfolio context. The appearance of a security on this screen does not mean it is held in any specific client account, nor does it mean it is suitable for any particular investor.

SUBSCRIBERS VS. CLIENTS: Paid subscribers receive this research for informational and educational purposes. ARTAIS clients receive personalized portfolio management under a written investment advisory agreement. This publication is not a substitute for individualized investment advice. If you are not an ARTAIS client and wish to receive personalized advice, please consult a qualified financial professional who can assess your individual circumstances.

PERFORMANCE: No performance data for this screen is published, calculated, or implied. Past inclusion of a security on this screen is not indicative of future results. All investments involve risk, including the possible loss of principal.

NO OBLIGATION TO UPDATE: Securities may be added to or removed from this screen at any time based on the methodology’s criteria. ARTAIS has no obligation to notify subscribers of changes between scheduled publications.

LARGE-CAP FOCUS: This screen evaluates securities with market capitalizations generally above $8 billion. This does not imply that large-cap securities are less risky or more suitable than other investments.

Do not buy or sell any security solely based on its appearance on or removal from this screen.

© 2026 ARTAIS Capital Management, LLC. All rights reserved.

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into what I am seeing

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

At a Glance

Market regime: Cautious

The Call

Typically, as summer progresses, much of Wall Street heads to the beach.

This can sometimes change the market dynamic from one of building positions in a portfolio to one of short-term trading.

For trend-based models, like the one I deploy at ARTAIS Capital, this narrow rotation can lead to a boring and stagnant environment. This can be seen in the list of names passing my screening requirements, which continues to get smaller and smaller.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

However, sometimes, this can spook a high-performing sector that has gotten a lot of attention, especially from retail traders.

For example, semiconductor stocks:

While I like to wait for the trend to reestablish itself, the current pullback in semiconductor names is worth paying attention to.

I have been discussing this pullback in depth on Substack Notes, and it seems like we are getting to the point of the pullback where investors are looking for opportunities.

We just need a catalyst to get going, and China just gave us one.

China just released its most powerful open-source AI model, Kimi-K3, and it’s impressive:

AI company CEOs, like OpenAI’s Sam Altman and Anthropic’s Dario Amodei, are already taking advantage of this news by stoking the fears of China winning the AI race.

Kimi-K3 gives AI leaders talking points to help them raise more capital from investors, lobby the government for more funding with fewer restrictions, and provide a topic for CFOs to focus on during upcoming earnings season (which is about to start) that distracts investors from any short-term negatives.

For example, look at today’s headlines in the WSJ:

…and some of the quotes from AI leadership:

OpenAI and Anthropic executives are sounding the alarm about the rise of cheap AI, particularly powerful new models produced in China, suggesting they will lead to a “dystopian” AI future and present unacceptable security risks without regulation.

“One probable outcome of an open-weight-model-dominant world is full AI communism, which is precisely what China proposes: rather than a market product, AI is a ‘public good’ which will ultimately be provided by the state as a kind of ‘digital public infrastructure,’” Dean Ball, OpenAI’s head of strategic futures, said in an X post Friday.

source: WSJ

For now, I will be watching semiconductor stocks to see:

1. whether they can reestablish their longer-term upward trend,

2. if AI leadership continues to focus on the US vs China narrative,

3. how investors react to upcoming earnings releases (are investors focused on the short term, like quarterly cash flows, or have AI leaders been able to make investors refocus on the US vs China narrative?)

(Current ARTAIS clients, please reach out to me for a free paid subscription)

Under The Hood

Sector Watch

Read more

If you are not familiar with it, the Presidential election cycle is one of the oldest observations in market seasonality, popularized by Yale Hirsch in the Stock Trader’s Almanac.

The idea is simple: U.S. equity returns have historically clustered by where the calendar sits in the four-year presidential term:

The conventional explanation is political-fiscal. In the first two years of a term, an administration tends to deal with the harder policy changes in its agenda.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

By the second half of the term, the incentive flips toward economic stimulus and clarity ahead of the next election, in the hope of getting the incumbent party reelected.

In this week’s note, I want to dive a bit deeper and discuss some of the opportunities that are beginning to unfold and how it relates to this cycle.

The Current Pullback in Technology

As of the July 15, 2026 close, the S&P 500 sits at only 0.5% below the record it set on June 2.

However, if we look one layer down, the picture is very different. The technology sector is down over 10% since its June 2nd peak:

Source: OPTUMA

And the iShares Semiconductor ETF (SOXX) has fallen over 18% since its high in June.

What makes this interesting is the fact that the Technology sector is the largest component of the S&P 500 Index.

So how is the S&P 500 index nearing its previous all-time high when the Tech sector is down over 10% since June?

Financials and Health Care have taken over and have been supporting the index, while Tech falters. Since the June 2nd peak in Technology, Financials and Healthcare are each up over 10%:

What does this pullback in Tech have to do with the midterm elections?

Let’s dive deeper into the historical trends of this cycle…

The Midterm Summer Low, and What Typically Follows.

If we study the midterm election years as a group, a pattern begins to emerge. A choppy, range-bound first half, a soft patch across late spring and summer, a low, and a recovery that builds into the November election and accelerates into the pre-election year.

The charts below plot every midterm year since 1950 indexed to the prior year-end (=100), from January 1 into the election, with the bold navy line showing the average path.

I have also highlighted both the mean and median values of when the low has occurred:

Technology shows similar timing, but with a wider range (this is due to the sector’s higher beta).

For this, I am using Kenneth French’s business-equipment (technology) industry portfolio on a total-return basis. His data can be accessed here: https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html

The average and median lows again cluster in the May–June window.

From the median June low into the end of October, the sector has averaged a 3.4% gain, positive in 58% of years — slightly outperforming the index, again consistent with Technology’s higher beta.

LPL Financial has noted that the S&P 500 was higher twelve months after every midterm low since World War II. The point for a tactical investor is directional: the midterm summer is historically closer to an entry than an exit.

While the move from the summer low into November has been positive, this is not where the real opportunity lies.

Over the twelve months following the midterm low and into the pre-election year, the S&P 500 index has averaged +17.2% and finished higher 89% of the time since 1950.

Using the end of June as a start date and Kenneth French’s data, the 12 months after the typical low have been pretty impressive for the Tech sector:

Source: Kenneth R. French Data Library, 12 Industry Portfolios, “BusEq” (business equipment: computers, software, electronic equipment), average value-weighted monthly TOTAL returns, 1950–2023 (mba.tuck.dartmouth.edu/pages/faculty/ken.french). Start = June month-end of each midterm year (the composite mean/median low month); return compounded over the following 12 months.

What about Health Care and Financials?

The below Relative Rotation Graph is already showing the momentum starting to weaken for Health Care and Financials:

If you are not familiar with Relative Rotation Graphs (RRG), they allow us to visualize market rotation in real time.

RRGs typically rotate in a clockwise fashion, and research has shown that opportunities occur when a sector is in the lower left quadrant. This is due in part because investors start looking for value after a pullback in price (Think buy low, sell high).

(Current ARTAIS clients, please reach out to me for a free paid subscription)

As I mentioned in this week’s Signal & Noise Report, in his paper, “Buying Out Performers is Too Late,” Mathew Verdouw, CMT, CFTe, highlights that when stocks are in the Lagging Quadrant (the red, bottom-left quadrant), 90% of the time they continue to rotate to the Improving Quadrant:

This means 90% of the time these stocks see a rise in positive momentum and relative strength.

But John, what about the down years during a midterm election year?

Up Years vs. Down Years — What Actually Separates Them

Averages hide the most important fact about midterm years, which is that they are bimodal.

The useful question is not “is this a midterm year” but “which kind of midterm year is this.”

The dividing line is not the calendar. It is the economy. Sort the down years, and every one of them coincided with a recession or an aggressive monetary-tightening bear market: 1962 (a growth scare), 1966 and 2022 (Fed-tightening bears), and 1970, 1974, 1990, and 2002 (recessions).

Sort the up years, and they are, almost without exception, ordinary economic expansions.

Grouped that way, expansion midterm years finished higher in 11 of 12 cases and averaged +11.4% into the election, while recession-and-tightening midterm years were down in all 7 and averaged −17.6%.

Where Does 2026 Sit?

On the evidence available today, 2026 fits the expansion profile rather than the recession profile, on three independent measures:

· No recession. The U.S. economy is not in an NBER-dated recession, and the S&P 500 sits within 1% of an all-time high. In most prior midterm years that finished lower into the election, the market was already in the red by summer. 2026 is not.

· A strong first half. The S&P 500 was up 10.6% year-to-date at mid-July. Historically, a positive mid-July has skewed the outcome sharply: midterm years that were higher at mid-July finished higher into the election 78% of the time (average +10.6%), while those that were lower at mid-July finished up only 40% of the time (average −8.3%).

· Positioning. Down midterm years averaged −11.3% at mid-July; up years averaged +5.7%. At +10.6%, 2026 is running ahead of the typical up-year trajectory, not behind it.

Of course, none of this guarantees the outcome. Instead, the data implies that the version of the midterm pattern that applies in a healthy expansion is the relevant base rate for 2026.

In Summary

Put the three threads together. First, the calendar: a midterm-year summer, historically the interior low of the weakest year in the cycle, handing off to the strongest.

Second, the regime: an ongoing expansion with the index near highs, which is the profile that has produced up years 11 times in 12.

Third, the pullback itself: the highest-beta group in the market has already corrected 14% to 18% from its June peak while the index has barely moved.

This is what a sector-level pullback inside an intact stock market uptrend looks like.

Semiconductors led on the way up, and high-beta leadership giving back part of a large advance during the summer soft patch is exactly the behavior I would expect to see in this cycle.

My research on beta and the Presidential cycle has found that the technology and high-beta complex tends to bottom slightly later than the index and then leads the recovery once the Year 2-to-Year 3 handoff begins, with the deepest relative weakness clustered in the June-to-September window that the market is now traversing.

The analytical observation, then, is that a semiconductor group down 14% to 18% from its June high, inside an expansion, in a midterm summer, is sitting at the intersection of three separate historical tailwinds rather than at the start of a structural breakdown.

That does not make it a certainty, and it is not a recommendation to buy any specific security. It is a statement about base rates: history has more often rewarded accumulation into this kind of weakness than punished it.

Skeptic’s Corner

So what can go wrong? I like to always examine the opposite side of the argument, then use the weight of the evidence to help formulate my decisions.

· The sample size is small. Nineteen midterm years is a small sample, and U.S. Bank’s analysis that election-cycle effects are not statistically significant is not a throwaway caveat.

· Regime risk is the whole game. The entire positive year case rests on the expansion continuing. If the labor market rolls over, if inflation forces the Fed back to tightening, or if an earnings reset hits the AI capital-spending cycle, 2026 gets reclassified into the recession scenario, and that scenario was down every single time, by an average of nearly 18%. Semiconductors, as the highest-beta group, would lead that decline just as they have led the advance.

· The correction may not be over. A 14%–18% drawdown is not necessarily the low. High-beta groups have historically bottomed later than the index, sometimes not until the autumn; SOXX down 18% could become SOXX down 25% before it turns. “Cheaper than June” is not the same as “cheap,” and semiconductors are still up sharply on the year. Plus, Tech earnings release tends to cluster near the end of July.

· Seasonality is not a thesis. Semiconductor valuations and the durability of AI-driven demand remain the open questions under the price action. Seasonality can only ever be a supporting argument; it cannot substitute for the fundamentals, and it should never be the primary reason to own a cyclical, richly-valued group.

The measured conclusion: the weight of the historical evidence leans constructive for technology into November, but the argument lives or dies on the economic regime. Watch the data that can break it, like labor, inflation, and the trajectory of AI-related capital spending.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

DISCLAIMER

This article is published by John Rothe, CMT, principal of ARTAIS Capital Management, LLC (“ARTAIS Capital”), a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The opinions expressed in this newsletter are for informational and educational purposes only and do not constitute investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services. All investments involve risk, including the possible loss of principal.

Any references to past performance, market data, or historical patterns are not indicative of future results. Forward-looking statements reflect the author’s current analysis and are subject to change without notice.

ARTAIS Capital Management, its principal, and/or its clients may hold positions in securities or asset classes discussed in this publication.

For personalized investment advice, please consult a qualified financial professional who can assess your individual circumstances.

NATURE OF THIS PUBLICATION: This screen represents the complete output of a systematic, rules-based quantitative methodology. It is published for informational and educational purposes only. It is NOT a model portfolio, NOT a recommended holdings list, and NOT personalized investment advice.

CONFLICTS OF INTEREST: ARTAIS Capital Management, its principal, and/or its clients may hold, buy, or sell any security listed in this publication at any time, without notice, and without regard to the publication schedule. Some securities appearing on this screen may also appear in ARTAIS client portfolios. Client portfolio decisions are made independently based on each client’s investment objectives, risk tolerance, time horizon, tax situation, and overall portfolio context. The appearance of a security on this screen does not mean it is held in any specific client account, nor does it mean it is suitable for any particular investor.

SUBSCRIBERS VS. CLIENTS: Paid subscribers receive this research for informational and educational purposes. ARTAIS clients receive personalized portfolio management under a written investment advisory agreement. This publication is not a substitute for individualized investment advice. If you are not an ARTAIS client and wish to receive personalized advice, please consult a qualified financial professional who can assess your individual circumstances.

PERFORMANCE: No performance data for this screen is published, calculated, or implied. Past inclusion of a security on this screen is not indicative of future results. All investments involve risk, including the possible loss of principal.

NO OBLIGATION TO UPDATE: Securities may be added to or removed from this screen at any time based on the methodology’s criteria. ARTAIS has no obligation to notify subscribers of changes between scheduled publications.

LARGE-CAP FOCUS: This screen evaluates securities with market capitalizations generally above $8 billion. This does not imply that large-cap securities are less risky or more suitable than other investments.

Do not buy or sell any security solely based on its appearance on or removal from this screen.

© 2026 ARTAIS Capital Management, LLC. All rights reserved.

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into what I am seeing

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

At a Glance

Market regime: Cautious

The Call

The US market is still “risk-on”, but rotating based on geopolitical events and inflation data.

To start, intermediate and long-term trends are still positive:

In the chart above, I have highlighted the S&P 500 in red and green. The red-shaded area is where the intermediate trend turns negative/bearish.

The strategy I manage at ARTAIS Capital is based on intermediate trends, so this is the time frame I tend to focus on most. (Think weeks to months instead of hours to days.)

(Current ARTAIS clients, please reach out to me for a free paid subscription)

While the trends are positive, the market is still rotating and has begun to favor large-caps over small-caps:

The above chart is called a Relative Rotation Graph (RRG). It measures both momentum and relative strength. RRGs typically rotate in a clockwise fashion and allow us to visualize market rotation in real time.

Currently, the RRG is showing improved strength in large-cap areas of the market relative to small and mid-cap areas.

This is in part due to the rotation of the large-cap-heavy tech sector:

The tech sector is currently in the weakest quadrant as shown in the above Relative Rotation Graph; however, this is where many traders start to look for opportunities to enter names that have strong long-term growth, but at a cheaper price.

In his paper, “Buying Out Performers is Too Late,” Mathew Verdouw, CMT, CFTe, highlights that when stocks are in the Lagging Quadrant (the red, bottom-left quadrant), 90% of the time they continue to rotate to the Improving Quadrant:

This means 90% of the time these stocks see a rise in positive momentum and relative strength.

Large-cap tech leaders, like NVDA and AAPL, are showing signs of this improvement in momentum:

The rotation into Tech may also get a boost from today’s inflation data, which showed that inflation is starting to decline:

A big reason for the drop in inflation was lower oil prices:

I wrote about the impact higher oil prices were having on inflation back in June:

https://www.johnrothe.com/p/inflation-just-hit-42-take-out-oil

…and how the market was too aggressive on its outlook for higher interest rates.

And after this morning’s inflation data, betting markets are now predicting low odds of a rate hike from the Fed during its July 29th meeting:

This is bullish for the market and bullish for AI, as lower short-term interest rates favor continued borrowing to fund AI growth.

Under The Hood

Sector Watch

Read more

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into what I am seeing

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

At a Glance

Market regime: Cautious

The Call

Is the market starting to regress back to its mean?

The concentration into tech names, especially AI leadership names, is at (in my opinion) ridiculously high levels.

Does this mean it’s time to pack up and go home?

Not necessarily. These overconcentrations can take years to resolve.

The 90’s Tech Boom

I remember in the late 1990s, I was at Morgan Stanley, and there were so many pundits and analysts arguing back and forth about the tech bubble we were in.

The arguments were the same as today: “The valuations are too high and don’t support future growth” vs “The internet is new technology and will change the world. This time is different”.

Sound familiar?

I heard a lot of these arguments in 1998, two years before NASDAQ peaked (which then took 15 years to recover). I think we are somewhere in this timeline now with AI tech.

(Current ARTAIS clients, please reach out to me for a free paid subscription)

However, timing the top is next to impossible since major market tops (and the crash that follows) are usually based on emotions and not logic.

Post Tech Boom: 2000-2013

After the tech boom, the period between 2000 and 2013 was a brutal sideways market that included 2 major declines of -49% and -56%.

EDIT: (apologies - for some reason Substack didn’t save my final version and instead published a draft. Below are the correct paragraphs):

Part of the reason for this period was simple math: the index spent over a decade working off the valuation extreme in its biggest names. In March 2000, large-cap tech traded at valuations that assumed a decade of perfect growth.

For the most part, the growth did show up. The stock returns didn’t, however, because the price had already been paid.

But here’s what a lot of people forget about those years. Underneath that sideways S&P 500, leadership rotated into the unloved parts of the market: Financials. Energy. Materials. Industrials.

The cheap, boring, cyclical stuff that had been priced for irrelevance in 1999. Technology’s weighting in the S&P 500 Index fell from roughly 38% at the 1999 peak to about 14% by the end of 2002, while Energy and Materials grew to a combined weight of roughly 20% by 2008.

One thing I want to be careful about, because I’ve seen this history told wrong: the internet infrastructure buildout was not where capital rotated to after the crash. It was the epicenter of the crash itself.

The fiber was laid during the mania — telecom capital spending peaked in 1999-2000 — and when the bubble broke, the infrastructure builders were the worst casualties.

WorldCom and Global Crossing went bankrupt. Cisco, the “picks-and-shovels” darling of that cycle, needed a quarter century to reclaim its March 2000 high — it finally did so in December 2025, and only because it found a second act selling AI infrastructure.

Yet, the internet kept growing; the companies that spent years building the infrastructure had already spent tomorrow’s demand on yesterday’s stock price. (Keep that thought — I’ll come back to why this cycle’s infrastructure may be different.)

Is the Rotation Away from Tech Starting?

I bring this up now, as there are some signs that the sector weightings in the S&P 500 are starting to move away from Tech.

Value areas of the market have been outperforming their growth counterparts this year.

While one of the reasons (similar to 2000-2013) is simply because there are better and more realistic valuations in areas like Energy, Industrials, and Materials. But I believe the real driver is still AI growth.

So, while I believe we are in a bubble, I don’t believe we are about to pop the bubble. There is still the need for infrastructure to be built out to accommodate AI growth, as an industry.

Instead, it looks like the market is starting to broaden by rotating away from the names that have helped drive up the S&P 500 Index to its current levels:

The largest 10 names (by weighting) in the S&P 500 are changing and are starting to lessen their impact on the index. Source: S&P Global, ARTAIS Capital

This rotation can be observed by looking at the Relative Rotation Graph of the individual sectors within the S&P 500 Index:

Relative Rotation Graphs tend to rotate in a clockwise manner. Technology is starting to lose positive momentum, while Health Care and Financials are improving.

The Next Opportunity for Investors

What this means to investors is that the easy money has been made.

Fans of “just buy the index and hold on” may be disappointed in the returns of the S&P 500 Index over the next decade, as sectors like Energy, Materials, and Utilities - key components of AI infrastructure and comprising only a small part of the index itself - outperform.

A move away from the crowded Tech sector into sectors that benefit from infrastructure growth may negatively impact the performance of the S&P 500 Index.

A second disappointment for the pure S&P 500 Index holders is that a lot of the companies that are becoming involved in the growth of AI infrastructure are not large-cap names, so they are not even represented in the index itself.

Plus, small and mid-caps as a factor have mostly been ignored. As a result, they don’t share the same extreme valuations as some of their large-cap counterparts.

During the period after the tech boom of the 90s, small and mid-caps outperformed large caps:

Many of the companies positioned for the physical buildout, like electrical equipment, grid components, specialty industrials, power producers, are small and mid-sized companies that aren't even in the S&P 500. During the last great rotation, that's exactly where the outperformance lived.

The takeaway from this is that investors who use actively managed strategies may have an opportunity for outperformance if the markets follow a similar pattern to what we saw post 2000.

The Next Space Race?

While the cost of AI is declining, the price of capacity is rising:

I see a big opportunity, especially if AI becomes the new “Space Race”.

Once the US government decides we need to win the AI race and begins to fast-track and aggressively fund infrastructure build-out, we may see conservative value companies in sectors like Utilities, Materials, and Industrials become fast-growing growth companies - and possibly tomorrow’s leadership names.

Under The Hood

Sector Watch

Read more

As of the July 1 close, the S&P 500 was up 9.3% on the year. That’s a respectable first half. But it also badly undersells what’s happening beneath the surface:

• Small caps are up 21.4%.

• Value is beating growth by twelve percentage points.

• The equal-weight S&P 500 is outrunning the cap-weighted version of the index.

• International and emerging markets are keeping pace or better.

This isn’t the narrow, MAG7-stocks-carry-everything market of 2023 and 2024. Leadership is broadening, and that changes the outlook for what the next four months can deliver.

With the index near record highs, a Fed that’s leaning hawkish, and a midterm election looming, is this the moment to reach for the exits?

My answer, as always, is that we don’t guess. We analyze the data and let the rules decide. So let’s look at the data.

The Election Cycle: How Midterm Years Have Historically Performed

So let’s start with the election calendar, because it has a well-documented pattern. Since 1950, the midterm year has been the weakest of the four-year presidential cycle.

The Dow has averaged under 5% in these years, versus roughly 10% in pre-election years.

More important for anyone deploying capital right now: the midterm year also carries the deepest average intra-year drawdown of the entire cycle, about 17.5%, versus 11 to 13% in the other three years.

“Intra-year drawdown” means the peak-to-trough drop inside a single year, and 17.5% is an average across cycles, not a forecast.

The under-performance also tends to cluster in exactly the window we’re entering. The second- and third-quarter stretch is historically the soft spot, with the S&P averaging roughly −1.5%.

Midterm-year lows have arrived late: the average bottom lands around August 18 and the median around September 29.

Here’s the part that I think matters the most: The midterm low has, historically, set up the strongest run in the election cycle.

The stretch from the fourth quarter of the midterm year through the following spring, what the Stock Trader’s Almanac calls the “sweet spot,” has averaged about +20% for the S&P 500.

One year removed from the midterm-year low, stocks have never been lower, and have gained roughly 32% on average.

And in the twelve months following the midterm election itself, the S&P has averaged +15.4% AND was positive in all 18 cycles since 1950.

The Positive Catalysts: What Could Carry the Markets Higher

Seasonality is a tendency, not a mechanism. What actually moves markets is earnings, liquidity, and positioning, and with that in mind, I find the fundamental backdrop does the real work.

1. Earnings are still growing, and fast. Analysts expect S&P 500 earnings to grow about 23% year over year in the second quarter. Estimates were revised up during the quarter, not down. Q2 reporting season kicks off July 14 with the big banks, and that will be the first hard read on whether the fundamentals are keeping pace with the price.

2. The AI capital-spending cycle is enormous, and still accelerating. The major hyperscalers are on track to spend roughly $725 billion on capital expenditures in 2026, up about 77% from 2025. That spending is the revenue line for a long chain of semiconductor, equipment, and power companies, which is why chip and semi-equipment names dominate this year’s small-cap leaderboard. It’s a genuine tailwind. As I’ll argue in the Skeptic’s Corner, it’s also the market’s single largest concentration risk.

3. The economy isn’t rolling over. First-quarter 2026 real GDP came in at +2.1%, revised higher, with business investment up more than 10%. Unemployment was 4.3% in May. However, this isn’t a boom. Today’s weaker jobs report is starting to change the market’s narrative.

The Fed wants lower inflation. For the past few weeks, the markets have been pricing in higher interest rates. After this morning’s jobs report, the probabilities of 1, or even 2, rate hikes this year are starting to fall. This is bullish for stocks.

4. The seasonal and political calendar turns friendly this fall. As noted above, the historically strongest window of the four-year cycle opens in the fourth quarter of the midterm year. Layer on the familiar “gridlock” theme, where divided government has historically coincided with solid equity returns, and the post-election period has often brought relief rather than risk.

Headwinds: Negative Catalysts to Watch For

1. Inflation is re-accelerating, and the Fed has noticed. This is the big one. Headline PCE, the Fed’s preferred inflation gauge, ran at 4.1% year over year in May, its highest in three years.

The Fed did not change rates on June 17, but the updated dot plot, the committee’s own projection of where rates are headed, leaned toward hikes rather than cuts, with roughly half of policymakers open to higher rates this year.

Under new Chair Kevin Warsh, the message has been explicitly about getting inflation back to 2%. While, as I mentioned above, weaker economic data may keep the Fed at bay, as a weaker consumer will lessen the upward price pressures (they have less money to spend, which means less demand). However, strong inflation data could still force the Fed’s hand into aggressively raising rates.

2. Tariff pass-through is landing now. The average effective U.S. tariff rate rose to roughly 7.7% in 2025, the highest since 1947. Economists broadly expect the consumer-price pass-through to peak between April and October 2026, squarely inside our window. That’s a live upside risk to the very inflation prints that constrain the Fed.

3. A fiscal cliff sits on September 30. Government funding expires September 30. With FY2026 having already opened with the longest shutdown in modern history, another funding fight into the fall is a real possibility, and it lands weeks before the election. Longer term, federal debt is projected to climb from about 101% to 120% of GDP, which puts pressure on long-term bond prices.

4. Geopolitics remains an oil-shaped tail risk. The Middle East escalation earlier this year drove crude sharply higher before it retraced, and the Fed explicitly cited “elevated uncertainty” tied to the region in its June statement. WTI is back around $67 and Brent near $70, both still up roughly 15 to 17% on the year, but this escalation is a reminder of how quickly an energy shock can reignite inflation and compress valuations.

5. Recession risk isn’t zero, and valuations leave little room for error. Twelve-month recession odds range from about 30% at Goldman Sachs to 40% at EY-Parthenon to 49% at Moody’s Analytics. Meanwhile, the S&P 500 trades near 20 times forward earnings, above its five-year (19.9x) and ten-year (18.9x) averages. Higher-than-average multiples don’t cause corrections, but they can magnify the damage when a negative catalyst arrives.

Under The Hood: Rotation, Breadth, and Where the Market Leadership is Heading

The most constructive development of 2026 is the one the index level hides: the market is broadening.

For two years, a handful of megacap platform stocks did the heavy lifting. In 2026, leadership has rotated, and rotation is generally a sign of a healthier, more durable advance.

Technology still leads on a sector basis, but the character of that leadership has shifted.

It’s moved from the megacap tech names toward semiconductors, AI hardware, and the industrial and energy complexes that feed the AI build-out.

Energy is up nearly 20%, industrials nearly 19%, materials 13%.

On the other side, communication services (home to several megacap growth names) is the worst sector, down 6%, and consumer discretionary is roughly flat.

That split is exactly why the broad Russell 1000 Growth index is up only 4% while Russell 1000 Value is up 17%.

The breadth signals reinforce it. The equal-weight S&P 500 (+12.3%) is beating the cap-weighted index (+9.9%), which tells you the average stock is outperforming the handful of giants at the top.

Small caps are having their best first half since 1991, with consensus 2026 earnings growth for the Russell 2000 climbing to roughly 38%.

What I’m Watching Between Now and November

This is the checklist I’ll be running against our models:

· July 14: June CPI and the start of Q2 bank earnings. The first real test of both the inflation trend and the fundamentals.

· July 28–29: FOMC. A hold is expected. Watch the language on inflation and the balance of risks more than the decision itself.

· Mid-to-late July: peak Q2 earnings. Are the roughly 23% growth estimates and the AI-capex guidance holding up?

· September 15–16: FOMC with a fresh dot plot. The most important policy event of the window. Does the Fed still lean toward hikes?

· September 30: government funding deadline. Shutdown risk, weeks before the election.

· August through September: the seasonal soft spot, historically where midterm-year lows form. Treat weakness as a shopping list, not a fire alarm.

· Early November: the midterm elections. History favors the twelve months that follow, especially if the result delivers divided government.

· All along: the inflation path, the dollar, and oil. These three are the transmission mechanism for nearly every risk above.

The Skeptic’s Corner

The seasonal edge may be a story we tell ourselves. U.S. Bank looked at the same midterm data and concluded the pattern is statistically insignificant: a sample of just 31 elections across 125 years, with outcomes ranging from losses over 30% to gains near 50%.

Their view is that the economy, not the election calendar, drives returns. And the recent exceptions are real. 2018 and 2022 were both midterm years with vicious declines. Seasonality is a probability tilt, not a schedule.

The market is priced for an easing cycle that may not come. Equities near 20 times forward earnings are implicitly assuming the Fed cuts into a soft landing. Headline PCE at 4.1% and a dot plot tilted toward hikes describe a different world. If the market has to reprice from “cuts coming” to “higher for longer, or higher from here,” the correction won’t wait for a seasonal script.

Concentration cuts both ways. The broadening I praised above is encouraging. But the S&P 500 index is still roughly 40% in ten names, and the AI-capex boom powering earnings is increasingly funded by debt and running well ahead of AI revenue. If that spending cycle even pauses, the cap-weighted index has a long way to fall before the “average stock” cushions it.

In Summary

The weight of history says a midterm year serves up its deepest drawdown in the summer-to-fall window we’re now entering, and then, more often than not, its best returns in the year that follows.

The fundamentals (roughly 23% earnings growth, a $725 billion capex cycle, 2% GDP) argue for staying invested.

The risks (re-accelerating inflation, a hawkish Fed, tariffs, a funding cliff, stretched valuations) argue for staying disciplined.

Those two statements aren’t in conflict.

They’re the whole point of a rules-based, adaptive approach. You don’t have to choose between optimism and caution when your process is built to lean into strength and step back from deterioration on signals, not on feelings.

If the seasonal soft spot arrives, we’ll treat it the way the data suggests it has usually deserved to be treated: as an opportunity that shows up on schedule and gets bought by the patient.

I’ll be watching the July inflation print and the September Fed meeting most closely. Everything else is noise until those two tell us whether the market’s priced-in optimism survives upcoming inflation data.

Sources

· Market levels and returns: ARTAIS calculations from Yahoo Finance adjusted closing prices, December 31, 2025 base through the July 1, 2026 close.

· Seasonality, drawdown, and off-the-low figures: Carson Investment Research (Ryan Detrick, “Thinking About 2026,” November 2025).

· “Sweet spot” +20% and the Q2–Q3 soft patch: Stock Trader’s Almanac (Jeffrey Hirsch).

· Twelve months post-midterm: +15.4% (Capital Group, May 2026); positive in all 18 cycles since 1950 (Forbes, October 2022).

· Skeptic case: U.S. Bank (January 2026), pattern statistically insignificant across a 31-election sample.

· Fed policy: FOMC statement and Summary of Economic Projections (June 17, 2026); rate-path odds per CME FedWatch (late June 2026).

· Inflation: BEA PCE (May 2026, headline 4.1% / core 3.4%); BLS core CPI 2.9% (May 2026).

· Growth and labor: BEA Q1 2026 real GDP +2.1% (June 2026); BLS unemployment 4.3% (May 2026).

· Earnings: FactSet Earnings Insight (2026), Q2 growth about 23%.

· AI capital expenditures roughly $725 billion (+77%): Value Add VC / company guidance (2026).

· Valuation and concentration: FactSet forward P/E near 20x; top-10 weight roughly 40% of the index (Morgan Stanley Investment Management).

· Tariffs: Tax Foundation (effective rate 7.7%, 2025); Council on Foreign Relations and JPMorgan (pass-through peak April–October 2026).

· Fiscal: Committee for a Responsible Federal Budget (September 30 funding deadline); CBO (debt 101% to 120% of GDP).

· Recession odds: Goldman Sachs 30%, EY-Parthenon 40%, Moody’s Analytics 49% (March 2026).

· Breadth and small caps: CNBC (June 2026), Russell 2000 best first half since 1991, roughly 38% 2026 EPS growth.

DISCLAIMER

This article is published by John Rothe, CMT, principal of ARTAIS Capital Management, LLC (“ARTAIS Capital”), a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The opinions expressed in this newsletter are for informational and educational purposes only and do not constitute investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services. All investments involve risk, including the possible loss of principal.

Any references to past performance, market data, or historical patterns are not indicative of future results. Forward-looking statements reflect the author’s current analysis and are subject to change without notice.

ARTAIS Capital Management, its principal, and/or its clients may hold positions in securities or asset classes discussed in this publication.

For personalized investment advice, please consult a qualified financial professional who can assess your individual circumstances.

NATURE OF THIS PUBLICATION: This screen represents the complete output of a systematic, rules-based quantitative methodology. It is published for informational and educational purposes only. It is NOT a model portfolio, NOT a recommended holdings list, and NOT personalized investment advice.

CONFLICTS OF INTEREST: ARTAIS Capital Management, its principal, and/or its clients may hold, buy, or sell any security listed in this publication at any time, without notice, and without regard to the publication schedule. Some securities appearing on this screen may also appear in ARTAIS client portfolios. Client portfolio decisions are made independently based on each client’s investment objectives, risk tolerance, time horizon, tax situation, and overall portfolio context. The appearance of a security on this screen does not mean it is held in any specific client account, nor does it mean it is suitable for any particular investor.

SUBSCRIBERS VS. CLIENTS: Paid subscribers receive this research for informational and educational purposes. ARTAIS clients receive personalized portfolio management under a written investment advisory agreement. This publication is not a substitute for individualized investment advice. If you are not an ARTAIS client and wish to receive personalized advice, please consult a qualified financial professional who can assess your individual circumstances.

PERFORMANCE: No performance data for this screen is published, calculated, or implied. Past inclusion of a security on this screen is not indicative of future results. All investments involve risk, including the possible loss of principal.

NO OBLIGATION TO UPDATE: Securities may be added to or removed from this screen at any time based on the methodology’s criteria. ARTAIS has no obligation to notify subscribers of changes between scheduled publications.

LARGE-CAP FOCUS: This screen evaluates securities with market capitalizations generally above $8 billion. This does not imply that large-cap securities are less risky or more suitable than other investments.

Do not buy or sell any security solely based on its appearance on or removal from this screen.

© 2026 ARTAIS Capital Management, LLC. All rights reserved.

What’s Inside:

1. At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.

2. The Call - A deeper dive into the “weight of the evidence.”

3. Under the Hood - Current market internals, sector breadth, and intermarket analysis.

4. Sector Watch - Which sectors pass/fail the screening process.

5. Current Screen - Which stocks pass the screening process.

6. What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.

At a Glance

Market regime: Cautious to Improving

The Call

Cautious to Improving - The relative rotation graph (RRG) of the broad market indices is showing that rotation away from small and mid-cap stocks into their large-cap counterparts is beginning:

Currently, areas like large-cap growth are starting to display improving momentum at the expense of small and mid-cap names.

To help verify this rotation, we should look at the defensive sectors of the market.

Defensive sectors, like Health Care and Real Estate, provide goods and services people need regardless of the economy, so they tend to hold up better during downturns but grow more slowly.

Growth sectors depend on expanding economies and rising spending, offering bigger gains in good times but steeper losses when conditions turn.

In short, defensives prioritize stability and income, while growth sectors prioritize upside and capital appreciation.

For the past few weeks, money has flowed into these defensive sectors, but they are now trading at key levels.

For example, Health Care is trading near overhead resistance - an area where investors have sold in the past (which are often used as short-term price targets):

Health Care: trading at resistance

Why does resistance matter? It is a level that short and longer-term traders watch.

If short-term traders don’t sell here, it means they are expecting the sector to continue to rise.

Real Estate: trading at resistance

Longer-term traders will also be watching for a breakout above resistance.

A breakout is an indication that longer-term investors expect to see the rotation into defensive areas of the market to continue.

In other words, a breakout is viewed as a confirmation that the overall theme of the market has changed from growth to defensive.

Weight of the Evidence

When the market is at these transition points, I find looking at the weight of the evidence is helpful.

The Good

First, let’s talk about the positives.

1. The Intermediate, and Long-Term price trends I follow are all positive, and the short-term price trend, while negative, is improving:

2. Market rotation, as I mentioned above, is indicating that large-cap growth momentum is improving:

3. Market Breadth has also been improving. The number of stocks trading above their respective 50-day and 200-day averages continues to rise:

4. Historical trends indicate that the market is in a bottoming process.

   Since 1950, the summer before the US mid-term elections tends to be weak for the S&P 500 index - with the bottom usually occurring in July:

The Bad

1. Investors continue to worry about AI growth as news stories continue to show corporations rethinking their approach to AI:

   

Most of the lending to fuel AI growth and expansion has come from Private Equity:

Private credit is lending done by non-bank institutions—like specialized funds—directly to companies, rather than through publicly traded bonds or traditional bank loans.

These loans are typically illiquid and held to maturity, but they often offer higher yields to compensate investors for that reduced liquidity and added risk.

It is an area that is receiving more scrutiny as illiquid loans are harder to price, worrying some that the next banking crisis will come from these loans

The concerning question is whether growth can continue at the current pace, or if we are getting closer to a bubble popping similar to what occurred after the rise in tech during the late 1990s.

2. High-yield spreads, while currently at low levels, have begun to rise.

   

   When investors are beginning to worry about risk in the economy (like defaulting loans from AI companies), spreads typically begin to rise.

High-yield spreads are the extra yield (over comparable Treasuries) that investors demand to hold riskier, below-investment-grade "junk" bonds—a gauge of market risk appetite, where widening spreads signal rising fear and narrowing spreads signal confidence.

I will be keeping a close eye on high-yield spreads, as a break above the Cloud model often coincides with larger market pullbacks:

Under The Hood

Sector Watch

Read more

When the conflict with Iran shut the Strait in late February, the price of crude did what it always does when there is a conflict in the Middle East: it went straight up.

This week, the channel is (hopefully) reopening.

A tentative framework to end the war and lift the U.S. naval blockade is headed for signing, oil has given back almost the entire war premium, and the relief is already working its way into prices at the pump.

That’s the headline, and the headline is good news. But it’s more complicated than just a headline.

The more useful question isn’t “Is oil going down?”

It’s “What does cheaper oil set in motion — who it helps, what it does to inflation and the Fed, and which part of the energy story doesn’t actually care about the price of a barrel at all.”

What Actually Happened

When the U.S. and Israel struck Iran on February 28, Iran moved to choke off Hormuz, and the U.S. blockaded Iranian ports. Oil reacted exactly as the textbook says it should.

West Texas Intermediate went from about $67 a barrel to a peak near $112 in early April. Brent ran from roughly $73 to about $118.

Call it a 60 percent spike in a matter of weeks, driven almost entirely by fear that the supply route would stay closed.

Then, over the past two weeks, the diplomacy turned. A framework emerged, mediated by Pakistan, to end the war, reopen the Strait, and lift the blockade.

The U.S. Treasury issued a 60-day license allowing Iranian crude to trade again. Tanker traffic started inching back through the channel. And the price did the round trip in reverse.

As of this week, Brent sits below $80 and WTI in the low $70s — down more than a third from the wartime peak and only modestly above where they started before the first missile flew.

The market has, in effect, decided the war is over. The fear is being priced out.

BUT — The Strait Has to Actually Open

I want to be careful here, because “peace deal signed” and “oil route fully normalized” are not the same thing, and the gap between them is where investors can get hurt.

The framework is tentative.

Earlier this month, the talks were abruptly postponed for a few days before getting back on track, and the signing is still ahead of us, not behind us.

A 60-day license is a 60-day license — it’s a bridge, not a permanent settlement.

Implementation across a dozen-plus co-signing governments takes time, and the Strait has been a geopolitical pressure valve for fifty years. It can re-tighten.

So the current outlook is a probability, not a certainty.

The most likely path is that the channel reopens and oil stabilizes somewhere in the $65–80 range, with forecasters like JPMorgan already penciling year-end Brent closer to the mid-$60s.

But there is a case to be made that the deal wobbles and oil prices snap part of the way back.

The Inflation Dividend (this is the part that matters most)

Here’s where it gets interesting, and where last quarter’s pain quietly turns into this quarter’s relief.

Energy doesn’t just sit in its own “box” in the inflation data. It leaks into everything — what it costs to fly a plane, truck a pallet, make a plastic bottle, run a farm.

When oil spiked, it dragged the whole inflation index up with it.

Headline CPI, which was running a tame 2.4 percent before the war, jumped to 4.2 percent by May.

That spike is most of why the Fed’s new chair, Kevin Warsh, spent his first weeks talking about nothing but price stability and took rate cuts off the table.

Now run the scenario backward.

Gasoline prices adjust to crude fast, usually within weeks. As the war premium bleeds out of oil, it bleeds out of the inflation data too — first in the June reading, more visibly in July.

This is the single most important takeaway in the whole piece: the same oil move that made inflation look scary is now poised to make it look tame.

A good chunk of that 4.2 percent was always a war tax, not embedded, sticky, wage-driven inflation. War taxes reverse when the war ends.

There are two real consequences:

The first is for households — the energy tax on the family budget is lifting. This puts money back into the pockets of consumers, without anyone getting a raise.

The second is for the Fed. If headline inflation drifts back toward 3 percent and then lower over the summer, the case for a hostile and rate-hiking central bank gets weaker by the month.

Who Wins When Oil Falls?

When energy gets cheaper, the benefit doesn’t spread evenly. It concentrates in the businesses where fuel is a big, unavoidable line item.

This is the part of the market that was quietly penalized all spring and now gets a tailwind.

Many of these areas were treated as collateral damage during the oil spike.

As the premium unwinds, the same math that hurt them in April starts helping them.

What History Says: The 6 Months After an Oil Scare

This isn’t the first time a geopolitical shock spiked oil and then reversed.

Going back to 1980, the pattern has repeated often enough to be worth studying to see which sector benefited.

Note: The S&P 500’s eleven sectors, as we define them today, didn’t all exist back then.

The official framework (called GICS) only dates to 1999; Real Estate wasn’t split out until 2016, and Communication Services wasn’t reconstituted until 2018.

Here are the major episodes since 1980 in which a geopolitical or supply shock drove oil sharply lower, along with what the broad market did over roughly the following six months.

The most important column in that table isn’t the oil decline. It’s the recession column.

Across roughly seven oil-shock episodes since the mid-1980s, the S&P 500 averaged about a 24 percent gain over the following year, positive in six of seven, with the lone exception being 2008, when oil’s move coincided with a full financial-system breakdown.

What determines the next six to twelve months isn’t the direction oil moved; it’s whether a recession shows up.

And 2022 is the cautionary tale on the other side…

Oil fell hard in the back half of that year, but a Fed in full inflation-fighting mode dragged stocks down anyway.

When the central bank is the dominant force, it can override the oil tailwind entirely — worth remembering with Warsh in the chair today.

Sector Tilt

When the energy tax on households lifts, the money flows to where people spend it (discretionary), to the firms that move goods more cheaply (industrials and transports), and to the cyclical, risk-on corners that lead once recession fear fades (financials, tech).

Energy is the reliable laggard for the obvious reason. The defensive, rate-sensitive sectors — staples, utilities, real estate — usually trail in the rally but cushion the blow if the optimism proves wrong.

Caution: These are historical tendencies, not promises. Every episode had its own crosscurrents; the sample is small, and “on average” hides a lot of variation.

But AI Growth Needs Energy

When oil dropped, energy stocks dropped with it — many oil and gas names fell 10 to 20 percent in a month, leaving a lot of them below where analysts peg fair value.

The instinct is to read that as “oil is falling, so avoid energy.”

Sometimes that’s right. But it flattens an important distinction. When oil weakens, capital spending slows, the over-levered weak hands get washed out, and the survivors — the companies with clean balance sheets and low breakeven costs — come out the other side with less competition and more pricing discipline.

Selloffs driven by a headline rather than by company fundamentals are exactly where a patient investor goes shopping.

Not every beaten-down energy name; the strong ones with real free cash flow and a reason to exist below $70 oil.

I’m not naming tickers to go buy — that’s not what this article is about. The point is the category logic: a price-of-oil selloff and a quality-of-business problem are two different things, and the market routinely confuses them.

And the real interest in the Energy sector is due to the growth expectations for AI, and the business opportunities it can provide for Energy companies.

The Energy Sector Isn’t One Story. It’s Two.

Most people hear “energy” and think “oil price.” But the most powerful force in energy right now has almost nothing to do with the price of a barrel.

It’s electricity - specifically, the staggering amount of it that artificial intelligence requires.

Data centers are on track to consume on the order of 1,000+ terawatt-hours of electricity. (If they were a country, that would rank them among the largest power consumers on earth).

And the demand is growing around 15 percent a year, while the rest of the economy’s energy use barely moves.

After two decades of flat U.S. electricity demand, the growth forecast just bent sharply upward.

This is a structural, multi-year shift, and it does not care whether Hormuz is open or closed.

Crucially, a lot of that new demand is being met with natural gas, not oil.

Gas and oil prices have actually been diverging — oil falling on peace, gas firming on AI-driven power demand.

The reason natural gas demand is rising is due to the fact that the public grid can’t connect new mega-projects fast enough. As a result, hyperscalers are building dedicated natural gas plants right next to the data center.

source: TechCrunch

The economics aren’t close. A natural gas plant plugs in for roughly a tenth of the grid-connection cost of solar or offshore wind, and it can be powering servers in about 18 months, versus the multi-year wait for a grid hookup.

That’s why the winners of this growth aren’t only the oil companies — they’re the natural gas producers, the pipeline and “midstream” operators signing multibillion-dollar deals to power data centers directly, and the equipment makers who build the turbines.

One nuance worth flagging: the regulated electric utilities you’d assume are the obvious beneficiaries have actually lagged, because higher interest rates make their bond-like dividends less attractive.

If rates ease as inflation cools (see the section above), the interest in the Ulitlity sector may rise.

Will AI Keep Powering the Growth in Energy?

The case it continues: the demand is contracted, not speculative.

These are signed, multi-year power agreements tied to data centers that are already under construction.

Electricity, unlike a hot stock, is consumed and paid for every single day. And gas is the path of least resistance — cheapest to connect, fastest to build, available around the clock in a way intermittent renewables aren’t yet.

The case it disappoints: AI is getting more energy-efficient at a remarkable clip.

Better chips and leaner models can do more compute per watt, and if efficiency outruns demand, some of these power forecasts will prove too aggressive — the way fiber-optic capacity was massively overbuilt in 2000. (Remember Lucent?)

Build too many gas plants for demand that arrives slower than promised, and you get stranded assets and disappointed shareholders. The grid will also eventually catch up.

Skeptic’s corner

The deal could break. Everything above assumes the framework holds and the Strait stays open. If diplomacy collapses, oil re-spikes, the inflation relief evaporates, and the sector calculus flips. This is the single biggest risk to the whole thesis, and it’s not remote.

Cheaper oil isn’t always good news. Oil falls for two very different reasons: more supply (bullish for everyone else) or less demand (a warning that the economy is slowing). Most of this move is the supply story — Hormuz reopening. But if part of it is demand softening, then “cheaper gas helps the consumer” is cold comfort against a weakening jobs market. Watch which one it is.

The energy stocks may be cheap for a reason. If oil keeps sliding toward the mid-$60s or lower, today’s “oversold” names can get cheaper still, and weaker balance sheets can crack before the survivors re-rate. Oversold is not the same as safe.

DISCLAIMER

This article is published by John Rothe, CMT, principal of ARTAIS Capital Management, LLC (“ARTAIS Capital”), a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The opinions expressed in this newsletter are for informational and educational purposes only and do not constitute investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services. All investments involve risk, including the possible loss of principal.

Any references to past performance, market data, or historical patterns are not indicative of future results. Forward-looking statements reflect the author’s current analysis and are subject to change without notice.

ARTAIS Capital Management, its principal, and/or its clients may hold positions in securities or asset classes discussed in this publication.

For personalized investment advice, please consult a qualified financial professional who can assess your individual circumstances.

NATURE OF THIS PUBLICATION: This screen represents the complete output of a systematic, rules-based quantitative methodology. It is published for informational and educational purposes only. It is NOT a model portfolio, NOT a recommended holdings list, and NOT personalized investment advice.

CONFLICTS OF INTEREST: ARTAIS Capital Management, its principal, and/or its clients may hold, buy, or sell any security listed in this publication at any time, without notice, and without regard to the publication schedule. Some securities appearing on this screen may also appear in ARTAIS client portfolios. Client portfolio decisions are made independently based on each client’s investment objectives, risk tolerance, time horizon, tax situation, and overall portfolio context. The appearance of a security on this screen does not mean it is held in any specific client account, nor does it mean it is suitable for any particular investor.

SUBSCRIBERS VS. CLIENTS: Paid subscribers receive this research for informational and educational purposes. ARTAIS clients receive personalized portfolio management under a written investment advisory agreement. This publication is not a substitute for individualized investment advice. If you are not an ARTAIS client and wish to receive personalized advice, please consult a qualified financial professional who can assess your individual circumstances.

PERFORMANCE: No performance data for this screen is published, calculated, or implied. Past inclusion of a security on this screen is not indicative of future results. All investments involve risk, including the possible loss of principal.

NO OBLIGATION TO UPDATE: Securities may be added to or removed from this screen at any time based on the methodology’s criteria. ARTAIS has no obligation to notify subscribers of changes between scheduled publications.

LARGE-CAP FOCUS: This screen evaluates securities with market capitalizations generally above $8 billion. This does not imply that large-cap securities are less risky or more suitable than other investments.

Do not buy or sell any security solely based on its appearance on or removal from this screen.

© 2026 ARTAIS Capital Management, LLC. All rights reserved.