Commentary

The war is over, ships are flowing through the Strait of Hormuz, and crude is back near pre-war levels. We take this as a sign that peak inflation fears are behind us. Given a post-war backdrop, the committee continues to believe that the outlook for the U.S. economy is strong and inflation will remain sticky above the Fed’s 2% target, but pressures from energy are likely to subside, pulling inflation back slightly.

Even with energy’s retreat as a major contributor to CPI, inflation is not vanquished. This is evidenced by the market’s assumption of rate hikes by year’s end and Warsh’s first press conference striking a more cautious tone. In a post-war environment, the committee opted to exit the short-term TIPS position.

The committee decided to continue holding a neutral posture with regard to duration and curve positioning relative to the benchmark. Given rates have been extremely volatile as of late. Securitized allocation also remains neutral relative to the benchmark, but positioning in IG corporates (previously 70% relative) has been increased to 90% relative to keep the yield high as TIPS are exited.

Convertibles continue to provide exposure to technology and electricity (nearly 48% of underlying holding allocations). Two sectors that have benefited significantly from the AI infrastructure buildout.

The characteristics, rationale, and deviations below reflect the index positioning relative to the baseline benchmark effective July 1, 2026.

Tilt Rationale 

Neutral Duration	The committee continues to view the economy as strong and inflation as sticky.
Neutral Curve	The Index continues to hold a neutral curve position relative to the benchmark.
90% Underweight IG Credit	The Index has shifted from 70% underweight IG credit to 90% relative to the benchmark to generate additional yield.
Neutral Securitized	The Index holds a neutral position relative to the benchmark within the securitized sector.
5% Convertible Securities	Convertible securities have had a phenomenal year, and exposure to AI-related companies is attractive.

Allocation

Name	Market Value (%)
iShares MBS ETF	25.88
iShares 3-7 Year Treasury Bond ETF	15.61
Schwab Short-Term U.S. Treasury ETF	12.60
Schwab Long-Term U.S. Treasury ETF	9.40
Vanguard Short-Term Corporate Bond ETF	7.65
Vanguard Long-Term Corporate Bond ETF	7.50
Vanguard Intermediate-Term Corporate Bond ETF	6.47
iShares 7-10 Year Treasury Bond ETF	5.04
SPDR Bloomberg Convertible Securities ETF	5.00
iShares Agency Bond ETF	2.25
iShares BBB Rated Corporate Bond ETF	2.00
iShares 20+ Year Treasury Bond ETF	0.60