Paul Harris, Partner & Portfolio Manager, Harris Douglas Asset Management
Focus: North American and global stocks
Top Picks: Meta, Microsoft, EssilorLuxottica
MARKET OUTLOOK:
Equities were strong for most of the quarter, with the major indices pushing to records. The S&P 500 stood near an all-time high around 7,420 at the June 17 close, with the 10-year Treasury yield at 4.48 per cent, the fed funds range at 3.50 to 3.75 per cent, and the Dow hitting consecutive intraday records.
Growth held up well after sub-one per cent growth in the fourth quarter of 2025. Real gross domestic product (GDP) was expected to average over three per cent across the first three quarters of 2026, helped by resilient consumer demand and heavy capital spending related to artificial intelligence (AI). The defining shift was on policy and inflation: an Iran-war energy shock changed the math, inflation ran hotter than expected for about four months, and expectations flipped from rate cuts toward potential hikes.
At its June 17 meeting the first under new Chair Kevin Warsh, the U.S. Federal Reserve left rates unchanged at 3.5 to 3.75 per cent, with a number of officials now seeing rates rising in 2026.
Looking into the third quarter of 2026 (July–Sept.), the base case is a Fed on hold and “higher-for-longer,” with the bias tilted toward a possible hike rather than a cut. A Reuters poll showed nearly 70 per cent of economists expecting rates held through the rest of 2026 on persistent inflation and steady activity. Growth should stay solid, but the key swing factors are energy prices and the Middle East conflict, sticky inflation prints (consumer price index, or CPI, and personal consumption expenditures, or PCE), and a labour market that has settled into a low-hire, low-fire state with unemployment around 4.4 to 4.5 per cent.
For markets, the tension is rich valuations and big AI capex bills meeting a less-accommodative rate path; late-July second quarter earnings from the mega-caps will be an early test, and Warsh’s lighter-touch communication style (shorter statements, less forward guidance) adds some uncertainty.
The main tail risk is stagflation if energy-driven inflation persists while hiring softens.
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TOP PICKS:
Meta (META NASD)
The disconnect is that Meta grew earnings per share (EPS) for its 2025 fiscal year by 22 per cent and consensus expects roughly US$30 per share in its 2026 fiscal year, yet the stock fell approximately 17 per cent over the past year, leaving it at a forward price–earnings ratio around 17.3 to 17.6 times, which is cheap for approximately 20 per cent earnings growth.
Profitability is elite: gross margins of approximately 82 per cent, operating margins of approximately 41 per cent, and net margins approximately 33 per cent. Analysts simply apply a more normal approximately 25 to 28 times multiple to growing forward EPS, which mechanically produces a large target.
Microsoft (MSFT NASD)
Earnings keep compounding. EPS for the third quarter of the 2026 fiscal year was US$4.28 (up from US$3.47), revenue plus 18 per cent, with revenue forecast to grow approximately 14 per cent annually over three years and margins are very high at approximately 68 per cent gross, approximately 47 per cent operating, and approximately 39 per cent net, on a forward price–earnings ratio near 21 times.
The shares pulled back from a approximately US$484 January high largely because management guided to US$190 billion of capex in 2026, up 61 per cent, with gross margins slipping to their narrowest since 2022. Analysts view that as AI investment that pays off via Azure (still growing approximately 37–40 per cent), so targets stayed high while the price fell.
EssilorLuxottica (ESLOY US)
The stock fell roughly 46 per cent versus its index over six months, dropping from an approximately €376 high to an approximately €191 low.
Fundamentals are far more modest than the tech names: gross margins approximately 58 per cent and an adjusted operating margins targeted at 19–20 per cent for 2026, with consensus EPS around €7.29 for the next year and roughly mid-single-digit organic revenue growth.
It still trades richly on trailing earnings (price–earnings ratio approximately 33 to 35 times), but a depressed price against largely unchanged targets supported by the Ray-Ban Meta smart-glasses ramp is what creates the outsized gap.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| META NASDAQ | Y | Y | Y |
| MSFT NASDAQ | Y | Y | Y |
| ESLOY US | Y | Y | Y |
PAST PICKS: APRIL 22, 2025
MSCI (MSCI NYSE)
Then: US$538.48
Now: US$585.88
Return: 9%
Total Return: 11%
Bank of America (BAC NYSE)
Then: US$38.32
Now: US$57.49
Return: 50%
Total Return: 54%
Nvidia (NVDA NASD)
Then: US$98.89
Now: US$201.82
Return: 104%
Total Return: 104%
Total Return Average: 56%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| MSCI NYSE | Y | Y | Y |
| BAC NYSE | Y | Y | Y |
| NVDA NASDAQ | Y | Y | Y |
