The Q2 2026 Dunham Quarterly Pulse is now available.
The second quarter handed investors a contradiction: record highs on the screen and deteriorating data underneath.
The S&P 500 gained 14.87%. The Nasdaq surged 21.41%. And the spread between unemployment and inflation narrowed to one-tenth of a percentage point from the threshold that has historically ended in painful Fed tightening.
The tension between the two is exactly what this quarter's Pulse examines.
- The unemployment-inflation spread is 0.1 points from turning negative - a line that, when crossed in the 1970s, 1980, and 2021–22, meant the Fed eventually had no choice but to fight inflation.
- Global defense spending hit a record $2.887 trillion. AI infrastructure spending is headed for $700 billion. Both are pulling on the same copper, steel, and commodities - at the same time, independent of the business cycle.
- The yen hit a 40-year low even after the BOJ hiked rates. The dollar reversed from January lows to a 13-month high. The great EM rebalancing trade that drove early-year outperformance is now running into a headwind.
- $9 trillion in Treasury debt matures in 2026 - rolling at rates above issuance. The refinancing calendar doesn't wait for conditions to improve.
Inside this quarter's Pulse:
- Why the unemployment-inflation spread is the Fed's most constrained moment in a decade
- Why defense and AI are the two spending cycles advisors aren't pricing correctly
- What a 40-year yen low means for carry trades, dollar strength, and EM exposure
- The record equity issuance wave - and why buybacks may not be the offset the market thinks
- The Treasury refinancing wall and what it means for duration risk in 2026
You'll also see how the Dunham Investment Committee responded.
The Q1 call to add aggressively to Focused Large Cap Growth at SaaS-compressed valuations paid off — the Nasdaq's 21% surge validated the thesis.
Now, in Q2, the committee sold into that strength, rotating into Large Cap Value and Dynamic Macro for breadth. On fixed income, it cut duration and added to high yield and merger arbitrage - leaning into credit where the opportunity is widening, not waiting for it to become obvious. And on May 22nd, as markets surged on Iran de-escalation euphoria, DunhamDC did what it was built to do: it sold greed.
