It has been about five months since the last pullback in the stock market, which we define as a drop of at least 5% in the S&P 500. That was in late March, when, in response to the war in Iran and the spike in oil prices, the S&P 500 fell 5% below its all-time high of 7,002. These things happen. Historically speaking, pullbacks occur on average three times per year, or 15 times per traditional five-year market cycle. Corrections (when stocks drop 10%) are less frequent; they happen about once per year, with the most recent occurring during the build-up to President Trump's ultimately watered-down tariff plan in the spring of 2025. Stocks have always recovered from pullbacks and corrections, as well as from bear markets. The average time to rebuild after a pullback has been one month. Indeed, the S&P 500 earlier this year had recovered to an all-time high by mid-April. For a correction, it may take four months. Those recoveries are more dependent on the fundamentals in the market at the time. As we review current market fundamentals, we note that the economy is growing and corporate profits are increasing at an exceedingly healthy rate. Meanwhile, it is impossible to know when the Iran war will come to an end, and interest rates lately have been rising. But post hostilities, we expect oil prices to drop significantly and interest rates to stabilize and ultimately head lower. Overall, we remain optimistic that stocks can post gains in 2026, even if a pullback materializes between now and the end of the year.

Lockheed Martin is the world's largest defense contractor and has dominated the Western market for high-end fighter aircraft since it won the F-35 Joint Strike Fighter program in 2001. Aeronautics is Lockheed’s largest segment, which derives upward of two-thirds of its revenue from the F-35. Lockheed’s remaining segments are rotary and mission systems, encompassing the Sikorsky helicopter business; missiles and fire control, which creates missiles and missile defense systems; and space systems, which produces satellites and receives equity income from the United Launch Alliance joint venture.

Lockheed Martin is the world's largest defense contractor and has dominated the Western market for high-end fighter aircraft since it won the F-35 Joint Strike Fighter program in 2001. Aeronautics is Lockheed’s largest segment, which derives upward of two-thirds of its revenue from the F-35. Lockheed’s remaining segments are rotary and mission systems, encompassing the Sikorsky helicopter business; missiles and fire control, which creates missiles and missile defense systems; and space systems, which produces satellites and receives equity income from the United Launch Alliance joint venture.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.