The second quarter saw the S&P 500 advance 15.2% after its first-quarter pullback, leaving the index up 10.2% year-to-date. More than 80% of the S&P 500’s return this year has come from ten AI beneficiaries, representing exceptionally thin market leadership within the index and helping propel it to new highs through the second quarter. There is at least one asset class that has not hit a new high in almost six years: bonds. The Bloomberg US Aggregate index, sometimes called “The Agg,” includes investment-grade bonds in the United States across Treasuries, government-related and corporate securities, as well as mortgages and other debt. Perusing a graph of the index, which dates back to 1976, reveals that bonds’ current drawdown, which began after the market high on August 6, 2020, has never been this prolonged. Most of the damage occurred between the end of 2021 and early 2023 as demand re-emerged on the heels of COVID shutdowns only to meet reduced production capabilities, resulting in seventeen consecutive months when the consumer price index printed annual increases at least three times the Federal Reserve’s stated target increase of 2%.

Perhaps it is this type of quickly changing environment that prompted Kevin Warsh to rethink the Fed’s approach to monetary policy. Most new Fed chairs launch some type of policy review upon arrival; Jay Powell in 2019 launched a review of the monetary policy framework, culminating in a more “broad-based and inclusive” employment goal along with a flexible average inflation targeting framework designed to make up for a decade of persistent shortfalls.

Now, Warsh is taking a blank-slate approach from a supply-side perspective, meaning that his primary focus is maximizing the economy’s productive capacity; this is in contrast to so-called “demand siders,” who focus more on changing consumer appetite for goods and services to balance the Fed’s dual mandate of maximum employment and price stability. He is incorporating a wide range of views from leaders in their fields, ranging from business to academics and politics. As a longtime practitioner with deep experience operating in markets, he appears inclined to reduce precise forward communication in favor of more general and flexible operating principles, and he is likely to rely more on real-time data. So far, he is “talking the talk” with his first rate-setting statement being the shortest in six years; at just 130 words, it is also the second shortest in almost two and a half decades.

Markets appear inclined to trust Warsh, sending some interesting smoke signals out since January 30, the day the White House announced his nomination to serve as Chairman of the Board of Governors of the Federal Reserve System. While it is important to remember an intervening energy price spike, it is still instructive to consider what changes in forward-looking indicators may be telling us about the potential results from new policy direction. Maybe most noticeably, the bond market believes that Warsh will get inflation in check quickly. Its expectation of inflation over the coming two years has gone from 2.8% annualized at the time of Warsh’s nomination to under 2% just five and a half months later. Meanwhile, people who feared he would kowtow to the president with a quick rate cut need not worry – the market has gone from pricing in multiple cuts at the time of Warsh’s nomination to now expecting a rate hike by the end of this year.

The energy price spike combined with potential changes in policy have economists and bond investors alike expecting a bit of a reset: the yield curve’s steepness, as measured by the difference in 2- and 10-year bond yields, reversed course to flatten out after hitting a 4-year high within a few days of the nomination. The curve remains positively sloped and expectations for present-quarter growth have slowed, primarily on reduced expectations for net exports, but there is a more important and likely enduring dynamic continuing to gain steam – the real yield available on US ten-year inflation-protected securities is now north of 2%, or more than four times the median level observed between 2010 and 2020. This suggests strong investor optimism for our economy’s productive capacity and an ability for capital to generate real returns again after a decade of overhang from misallocated capital leading into the great financial crisis.

While many fret about stock market valuations that appear high relative to history, the aforementioned dynamics could imply continued strong returns for equities, especially stocks that generate excess capital and return it to owners, along with a better outlook for bonds over the coming decade.

As always, we remain the largest investors in our funds and appreciate your partnership.

Bill Miller IV, CFA, CMT
July 15, 2026

Jump to Fund Updates:
Miller Income Fund
Miller Value Partners Appreciation ETF (MVPA)
Miller Value Partners Leverage ETF (MVPL)

Miller Income Fund

The Miller Income Fund (LMCLX) gained 1.62% during the quarter, underperforming the ICE BofA High Yield Index’s total return of 2.47%, though the fund remains 384 basis points ahead of its benchmark year-to-date. View current month-end performance here. The fund’s concentration in financials, energy, and cryptocurrency-related securities detracted from performance in the quarter. No new positions were initiated, and no existing holdings were eliminated during the period. The fund significantly added to its Upbound Group (UPBD) position in the quarter, with shares trading at a forward (FY27) P/E of ~4.5x and offering a dividend yield of 7.4%, despite the stock’s highly-profitable base Rent-a-Center business and limited market recognition of the long-term earnings potential of its virtual lease-to-own and fintech platforms (Acima and Brigit). The fund also added to its holding of Millrose Properties (MRP), with shares of the land bank trading at a ~15% discount to book value and offering a 10.3% dividend yield, a disconnect that management itself capitalized on through substantial insider buys during the quarter, including a $6.4MM purchase by the CEO. The fund trimmed its position in Ituran Location & Control (ITRN) during the quarter, although it remains a top 10 holding. After strong share price appreciation in the quarter, the stock’s forward (FY27) EV/EBITDA multiple expanded to ~9.6x, near the upper end of its historical range despite remaining reasonable on an absolute basis. View current month-end holdings

Miller Value Partners Appreciation ETF

Miller Value Partners Appreciation Fund (MVPA) rose 6.85% (market price) during the quarter, underperforming the S&P 500’s 15.20% gain. View current month-end performance here. The fund’s overweight positioning in energy combined with its underweight positioning in technology and AI names, relative to the benchmark, detracted from performance. The fund initiated three new positions in the quarter. Meta Platforms (META) traded at less than 10x FY27 EBITDA estimates as of quarter-end, a nearly 20% discount to the S&P 500, which seemingly underappreciates the strategic value of the company’s best-in-class advertising ecosystem and unmatched global user base as a foundation for monetizing future AI innovations. Coty (COTY) is a global leader in fragrances, cosmetics, and skin care products, trading at a forward (FY27) EV/EBITDA multiple of ~6.5x, with a revamped management team leveraging the company’s vastly improved balance sheet and a refined, vertically integrated business model to reignite growth and expand margins. Ameriprise Financial (AMP), a diversified financial services firm with leading wealth and asset management franchises, has grown revenue and EPS at 9% and 20% compound annual growth rates (CAGRs), respectively, over the last 5 years (through 1Q26), while returning $14B to shareholders over the same time frame (~34% of current market cap), and yet trades at a compelling forward (FY27) P/E of ~9.6x.

The fund exited three positions during the quarter. Western Alliance Bancorp (WAL) approached our internal estimate of fair value. Portillo’s (PTLO) was eliminated to sharpen the portfolio’s focus, reallocating capital toward peer Bloomin’ Brands (BLMN), where improving operating trends and a similarly compelling valuation offered a more attractive risk/reward opportunity. The fund exited MasterBrand (MBC) as continued housing market weakness, tariff-related margin pressure, and the company’s historically delayed participation in a recovery overshadowed the stock’s cheap valuation. View current holdings

Miller Value Partners Leverage ETF

Miller Value Partners Leverage Fund (MVPL) rose 25.54% (market price) during the quarter, outperforming the S&P 500’s 15.20% gain. View current month-end performance here. After entering the quarter in a leverage-off position, the fund flipped to a leverage-on position once and remained in a leverage-on position as of quarter-end. The fund has outperformed its benchmark by 1,247bps on a market price basis over the last twelve months, and we remain confident in its long-term prospects. View current holdings

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The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the most recent month-end performance, please call 888.593.5110 or visit the Fund’s website at millervaluefunds.com