Delmarva Financial Group Mid-Year Update

Welcome to our third Delmarva Financial Group (DFG) client letter of 2026, as we have crossed the symbolic mid-year point on the calendar.

We want to take this time to recap our second quarter and give some insight into the second half of the year. We would like to share a few important updates about our team, the markets and maintain our focus as we begin the third quarter. Our focus remains as strong as we move into the second half of the year.

For us at Delmarva Financial Group (DFG), we want to emphasize three simple habits that we believe serve clients well:

• Clarity over complexity
• Process over predictions
• Proactive communication

DFG Team Updates:

First, a collective thanks for all the clients who have reached out to check on Beau and his family. As many of you know, Beau’s mother suffered her second stroke in 3.5 years on May 25^th. This stroke was a little different than the one from December of 2022. This impacted the left frontal lobe and while the first week recovery provided a similar recovery trajectory, on June 1^st, she suffered a major setback resulting in 100% expressive aphasia for a few days. The setback also impacted her mobility, especially on her right side and created other challenging circumstances for his parents. We are happy to report that just 30 days later, her speech has returned and she is improving daily, including now walking with walker and transferring with assistance, all things are nothing short of miracle. They are working on her return home in the next 30-60 days hopefully. Beau thanks everyone for their patience as his schedule and availability have been altered, but he still is present daily, whether in person or working remotely as needed.

Given this adjustment to Beau’s schedules based on the “what ifs” of life, Michael McGuire, who has been with DFG Team for 4 years this September, and following his promotion at the beginning of the year to Associate Financial Advisor, has been managing more of the day-to-day activities especially with regard to ongoing client service needs. Michael is in constant communication with Beau regarding all our clients’ scenarios involving both planning and investment strategies, but Michael has stepped up and don’t be surprised in the second half of the year if Michael is with Beau on calls, virtual meetings or in meetings, or oversees some of the scheduled meetings over the coming months to accommodate our clients but also Beau’s availability.

As you should all know now, Michele Shipley joined our team at the end of the first quarter. Many of you have interacted with Michele when visiting the office, or through phone calls or emails at this point. Michele joined us after a 30-year career as a paralegal; she has brought experience, a great attitude and work ethic to our team. Michele earned a bachelor’s degree in political science from St. Mary’s College of Maryland (SMCM) in 1992 and received a certificate in paralegal studies from Anne Arundel Community College (AACC) in 1995. Michele was born and raised in Maryland and has lived in Cape. St. Claire since 1997 where she and her husband raised their two children. She participates in her community and is actively involved with both her alma maters, serving on the Advisory Board of the Legal Studies Institute at AACC. At SMCM serves as the President of the Alumni Association and sits on the Board of Trustees for the College. If you have not interacted with Michele in the last 90 days, she has been overseeing many of the day-to-day responsibilities that Jenna performed for the firm for the last 15 years.

This past month, we onboarded another new team member, Colin Gray. Colin joins us as an Intern for the summer. As DFG grows, we feel it’s important to build opportunities for those who want to be in the financial industry. Beau, one of our co-founders, found his opportunity at Morgan Stanley in fall of 1998 until the spring of 2000 as a student at UMBC and credits this time as paramount in building his foundation. As Beau approaches his 26^th anniversary of being a licensed advisor, he would like to give back and provide similar opportunities for others. Colin is currently enrolled at Washington College, in Chestertown, MD as a Business Management and Economics double major, with a minor in international business. He also participates on the Men's Lacrosse team at Washington College, bringing his experience from Broadneck High School where he was a part of the 2023 State Championship team as a senior. Colin joins the team as an intern focusing on research and client services, where he has experience from Washington College as he is a part of the Student Managed Investment Club by Brown Advisory. Colin also enjoys traveling as he just finished an International Business trip to Croatia and previously studied abroad in Scotland, at the University of St. Andrews.

Our team remains dedicated to providing transparent guidance, reliable service, and timely updates. We believe these principles are fundamental to building lasting partnerships and helping you navigate your financial journey with confidence.

Now on to the nuts and bolts of economic, fiscal policy, trending themes and other worldwide events impacting the markets and your portfolio’s.

Q2 2026 Market Summary & Outlook

Q2 2026 Market Recap: Momentum and Moderation

The second quarter of 2026 was defined by a powerful continuation of the market's upward trajectory, followed by a healthy and widely anticipated period of consolidation in June. Driven by robust corporate earnings and an accelerating artificial intelligence infrastructure buildout, the S&P 500 pushed through historic milestones, testing new record highs above 7,600 before ending the quarter with a modest pullback.

The S&P 500 closed the quarter up approximately 13.9% from its early April levels, closing in June at nearly 7,499. While the headlines at the end of the quarter focused on a 2.7% tech-led cooling from June peaks, the broader underlying economic fundamentals remain remarkably stable.

Key Market Themes During the Quarter

• The AI Supercycle Expands: Artificial intelligence remained the primary engine of market gains. However, investor focus shifted from purely speculative software companies toward tangible infrastructures specifically semiconductors, data centers, high-end memory (DRAM), and power generation. Tech earnings grew at an astonishing pace, though late-quarter profit-taking caused a ~7% pullback in the "Magnificent Seven" from June highs.
• Sticky Inflation & Geopolitical Supply Shocks: Renewed tensions in the Middle East introduced a temporary supply-driven energy shock, pushing crude oil prices higher and keeping headline inflation hovering near 3%. This sticky data has kept the Federal Reserve patient, with the market adjusting expectations to just one potential rate cut later in the year.
• A Bifurcated Consumer: While higher-income households continue to benefit from strong asset values and healthy balance sheets, lower- and middle-income segments are feeling the cumulative pinch of elevated energy costs and persistent prices, leading to a noticeable divergence between Consumer Staples (stronger) and Consumer Discretionary/Autos (weaker).

Sector Performance Highlights

Earnings growth for the S&P 500 was remarkably strong in Q2, with aggregate earnings projected to rise to over 21% year-over-year. However, performance dispersion across sectors became much more pronounced:

H2 2026 Market Outlook: Optimism Coupled with Vigilance

As we enter the second half of 2026, our overarching outlook remains constructive but highly selective. We believe the structural bull market remains intact, supported by solid corporate capital expenditures and manufacturing expansion, but we anticipate more frequent bouts of volatility due to global fragmentation and sticky interest rates.

Strategic Portfolio Themes for H2

1. Look Beyond the Tech Giants for AI Exposure

The long-term AI investment cycle is far from over, but the easiest gains in concentrated mega-caps may be behind us. We are looking at the "pick-and-shovel" enablers of this transition: physical infrastructure, global power grids, industrial suppliers, and components like high-end memory.

2. Anchor Portfolios in Real Assets

With inflation proving to have a higher "floor" than in the previous decade, holding too much cash runs the risk of wealth erosion. We favor real assets, selective commodities, and energy sector exposure to function as a structural hedge against rolling geopolitical and supply chain shocks.

3. Emphasis on Quality and Diversification

With a new Federal Reserve chair and a patient central bank, bond yields remain competitive with equities on a risk-adjusted basis. Within fixed income, we favor a slightly below-benchmark duration strategy, focusing on high-quality corporate bonds to capture yields while mitigating interest rate volatility.

Closing Client Note

While short-term market consolidations like the one we experienced in June can feel unsettling, they are a healthy and normal characteristic of a durable economic expansion. They allow the market to digest rapid gains, recalibrate valuations, and broaden leadership out to other deserving sectors.

Our focus remains anchored on long-term fundamentals, disciplined diversification, and identifying resilient businesses capable of growing margins even in a higher-for-longer interest rate environment.

In closing, as we approach the 250^th anniversary of the signing of the Declaration of Independence, we hope our clients, family, and friends enjoy celebrating 250 years since our nation’s founding. May this milestone bring people together to reflect on the promise of the “Great Experiment” and the good it has made possible. We are grateful for the conviction, determination, and sacrifice of those who came before us, whose efforts helped create the opportunities we enjoy today.

Thank you for trusting Delmarva Financial Group as your wealth management firm. We look forward to helping your Grow the Life you Want, working together throughout 2026 and beyond.