July 29, 2026By Julie Kutasov

Following the AI Money Trail

Small Mid Cap Core 2Q 2026 Update | KayneCast 322

“As earnings growth had proven resilient, and recession fears had subsided, the quarter saw the market broadening from mega caps to smaller cap names.

Generally, a welcome trend, this time it was driven by a speculative rally that benefited a relatively small group of companies directly tied to robust AI spending -many of them unprofitable.”

Each quarter, Julie Kutasov, Portfolio Manager and Senior Research Analyst, provides an update on the performance of the Small Mid Cap Core strategy and shares her market outlook. Listen to her most recent episode where Julie recaps market activity during 2Q 2026.

Key Insights and Trends

  • Portfolio holdings continued to generate earnings growth and maintain competitive positions while exhibiting robust returns on equity and earnings consistency
  • Technology stocks and companies tied to AI spending drove strong benchmark performance, including many businesses with negative earnings
  • Early productivity gains from AI are becoming more visible, though many businesses continue to invest heavily before realizing the full profitability benefits

Stay Informed with Our Latest Insights

For more insights, read our 2Q 2026 Market Review Commentary or subscribe to KayneCast where we provide the latest updates from the KAR Investment Team on our investment strategies.

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