Executive Summary
The second quarter of 2026 was defined by a market rebound supported by strong corporate earnings. The fear of AI overspending and the risk of overproduction continues to float amongst investors’ minds. There were significant market momentum movements as the quarter was determined by volatile swings and short-term trades exacerbating the positive or negative direction of asset prices. We made significant movement in our fund, closing the quarter at 27% YTD. Once again, against this backdrop, Thrive Financial Partners continued to generate strong positive returns for our investors.
Our strategy remained disciplined and focused, allocating capital toward targeted equity positions in the defense sector where we identified clear structural tailwinds.
Market Commentary
Equities
Large Cap tech made a strong move during this time and has continued to push the market. Small Cap equities made a historic run this quarter by gaining roughly 20% in the market. It is a clear sign that the market is healthy and investor sentiment is positive; however, they are beginning to look for opportunities outside of AI-related equities. A sign that staying invested in the defense sector will pay out.
Rates & Inflation
The chances of a rate hike are becoming increasingly possible as the conflict in Iran is uncertain. Inflation is a signal of future asset prices that we will continue to monitor.
Portfolio Highlights
Top Contributors:
- Unusual Machines (UMAC): Gained market exposure after the WSJ reported that the Trump administration may invest in more USA defense companies.
Top Position
Unusual Machines Inc. (NYSE American: UMAC)
We maintain our long-term investment thesis in UMAC. Some information here is similar to what we reported in the first quarter.
During the quarter, we maintained a position in Unusual Machines (UMAC), a U.S.-based manufacturer of drone components and the only fully vertically integrated, NDAA-compliant domestic drone parts producer.
Our conviction is rooted in a straightforward supply-demand imbalance: demand for U.S.-made drone components is significantly outpacing domestic production capacity.
- The FCC’s December 2025 ban on new licenses for foreign-made drone parts.
- Removal of major Chinese suppliers from the approved vendor list.
- The Department of Defense’s $1.1 billion Drone Dominance procurement program.
- The acquisition of Upgrade Energy for drone battery packs.
- The doubling of their manufacturing capacity is located in their HQ in Orlando, FL.
UMAC is uniquely positioned to capture a disproportionate share of this demand, manufacturing motors, headsets, cameras, and batteries entirely within the United States at a moment when every drone OEM competing for government contracts requires a domestic supply chain. We believe the current price meaningfully undervalues the business given the structural tailwinds ahead.
The image below shows how we deployed a portion of available capital to take advantage of lower asset prices toward the end of the month. We use leverage only for brief periods, and only when there is an extreme disconnect between share prices and intrinsic value.
Risk Management & Outlook
Our disciplined approach continues to emphasize downside protection while seeking asymmetric upside opportunities. We entered UMAC at a technically and fundamentally favorable level where we believe downside is limited and meaningful upside remains available.
Key risks under active monitoring:
- Sustained geopolitical escalation impacting energy prices and consumer sentiment.
- How the market will react to the movements in earnings.
- Inflationary pressures may even raise the risk of a Federal Reserve rate hike.
Closing Remarks
At Thrive Financial Partners, our priority remains delivering consistent, risk-adjusted returns above benchmark while protecting client capital. We are proud of the results achieved this quarter and remain focused on building on this momentum in the quarters ahead.
We appreciate your continued trust and partnership, and look forward to sharing further updates as the year progresses.