| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Q1 2026 was defined by two major disruptions: geopolitical conflict in the Middle East and AI-driven technology sector upheaval. U.S.-Israeli strikes on Iran effectively closed the Strait of Hormuz, causing crude oil to surge from $57 to $101 per barrel and pushing fuel prices to four-year highs. This energy shock drove headline inflation to 3.3% year-over-year and raised stagflation concerns. Simultaneously, the SaaSpocalypse saw software stocks plummet 30-50% on fears that AI agents will erode traditional licensing models, compressing technology valuations to market levels for the first time in nearly a decade. Despite these shocks, U.S. large-cap stocks declined only 4.3% while small-caps gained 0.9%. Credit markets remained stable, suggesting underlying fundamentals were sound. The Federal Reserve maintained rates unchanged with no cuts expected for 2026. Looking ahead, market stability depends on Strait of Hormuz reopening and whether software disruption represents repricing or extinction. The optimal strategy appears to be patience given temporary nature of disruptions.
Geopolitical conflict and AI disruption shaped Q1 2026 markets, with energy supply shocks driving inflation concerns while technology valuations compressed amid fears of AI displacement of traditional software models.
Two key questions dominate the outlook: duration of Strait of Hormuz disruption and whether the SaaSpocalypse represents repricing or extinction for software. The optimal strategy may be patience, as credit spreads remained stable and crude futures suggest temporary rather than structural disruption.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 13 2026 | 2026 Q1 | - | AI, energy, Geopolitical, inflation, Iran, oil, software, technology | - | Geopolitical conflict closed the Strait of Hormuz, driving oil from $57 to $101 and stoking inflation fears. The SaaSpocalypse crushed software stocks 30-50% on AI disruption concerns. Despite these shocks, markets showed resilience with stable credit conditions. Energy normalization and software repricing timeline will determine near-term direction. |
| Jan 16 2026 | 2025 Q4 | AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA | consumer, credit, earnings, Federal Reserve, inflation, K-shaped, Midterms, rates | - | Markets finished 2025 strong but a K-shaped economy is widening inequality between higher and lower-income consumers. Inflation cooled to 2.7% while credit stress builds with record card limits. The Fed turned accommodative with rate cuts and QE restart. Political pressure from low approval ratings drives affordability focus. Robust earnings growth expected supports staying diversified with selective opportunities. |
| Oct 13 2025 | 2025 Q3 | AAPL, AMD, AMZN, CSCO, GOOGL, META, MSFT, NVDA, ORCL, TSLA | AI, Bubble, Fed, rates, small caps, technology, Valuations | - | Markets show bubble characteristics with AI driving massive capital expenditures and stretched valuations approaching dot-com peaks. Tech sector trades at 30x forward P/E while circular financing mirrors dangerous historical patterns. Fed cuts rates despite above-target inflation. Manager advocates cautious positioning and gradual reallocation to undervalued segments, expecting AI bubble dislocations to create compelling entry points. |
| Jul 11 2025 | 2025 Q2 | AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA, WMT | Bonds, equities, fiscal policy, inflation, rates, tariffs, Trade Policy, Treasury | - | U.S. markets rebounded strongly in Q2 2025 after tariff-induced volatility, with the S&P 500 gaining 10.9% and reaching new highs. The Big Beautiful Bill's passage extended tax cuts while adding $3.3 trillion to deficits, yet Treasury markets remained relatively calm, suggesting fiscal policies may extend the economic expansion. |
| Mar 31 2025 | 2025 Q1 | 005380.KS, AAPL, AMZN, DECK, GOOGL, META, MSFT, NVDA, TSLA, TSM | Defense Spending, Economic Policy, Global Markets, inflation, Market Commentary, rates, tariffs, Trade Policy | - | The Trump administration is executing a high-stakes economic gambit, using aggressive tariffs and spending cuts to restructure global trade and reduce deficits. Q1 2025 saw significant market volatility with U.S. stocks underperforming globally amid rising uncertainty. While corporations pledge massive U.S. investments to avoid tariffs, the ultimate success of this strategy remains uncertain. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
OilStrait of Hormuz closure due to U.S.-Israeli strikes on Iran severely constrained global oil flows, reducing crude production by 7.5 million barrels per day. WTI crude surged from $57 to $101 per barrel, driving fuel prices to four-year highs and amplifying inflationary pressures. Energy price normalization expected by year-end but dependent on conflict resolution. |
Strait of Hormuz Iran Energy Inflation Supply |
AIThe SaaSpocalypse pushed software stocks down 30-50% amid fears that AI agents will erode traditional per-seat licensing models. Technology layoffs increased as companies reallocate budgets toward AI investment. Market positioning around AI remains crowded with record mentions in earnings calls, though tech valuations compressed to market levels. |
Software Disruption Layoffs Valuation Technology | |
InflationEnergy price surge led to headline inflation rising 0.9% month-over-month in March, reaching 3.3% year-over-year. Cleveland Fed nowcast expects inflation to accelerate to 3.6% in April. Consumer inflation expectations increased from 3.8% to 4.8%, pointing to stagflationary environment concerns. |
Energy Expectations Stagflation Fed Prices | |
| 2025 Q4 |
GoldGold is positioned as a premier store of value with unique physical properties and scarcity. The manager created a leveraged gold exposure called 'Gresham's Wrath' that provides 1.5x exposure while generating income through option strategies. Central bank demand is accelerating while fiat currencies have lost significant value since 1971. |
Precious Metals Monetary Policy Inflation Central Banks Currency |
Defense SpendingGlobal armaments exposure focuses on companies making weapons for nation state security. The entire world is rapidly rearming off an extremely low base of defense spending. This position materially outperformed for the year despite quarterly underperformance. |
Defense Geopolitics Military Security Spending | |
JapanThe manager maintains long-term bullish views on Japan but exited unhedged exposure due to currency headwinds from a weakening Yen. They rotated into dynamically hedged Japanese exposure that filters for companies treating shareholders better and adjusts currency hedging based on four separate models. |
Japan Currency Hedging Shareholders Governance | |
BitcoinDespite long-term bullish views, the manager completely exited Bitcoin in mid-November using a risk management framework similar to commodity trading funds. They are pleased with the exit timing as Bitcoin continued falling while US Large Cap equities they rotated into increased in value. |
Cryptocurrency Risk Management Digital Assets Volatility | |
Capital MarketsExchanges are positioned as essential high-margin toll roads for the economy with immense operating leverage. They benefit from network effects, regulatory barriers, and revenue tied to nominal transaction values. The exposure includes both market technology providers and proprietary product owners. |
Exchanges Trading Technology Data Infrastructure | |
Managed FuturesThis alternative strategy is designed to generate absolute returns with low correlation to equities and bonds. It uses multiple models across price trends, fundamental reversion, carry, and risk-flow. The strategy was updated to include European exposures alongside North American ones. |
Alternatives Commodities Hedging Systematic Diversification | |
| 2025 Q3 |
AIAI bubble concerns are growing as mega-cap tech companies have more than doubled AI-related capital expenditures since ChatGPT's launch. Hyperscalers are expected to spend $340 billion on AI infrastructure in 2025, nearly 1% of U.S. GDP. OpenAI's $500 billion valuation and circular financing arrangements with Nvidia and AMD mirror dot-com era vendor financing patterns. |
Data Centers Cloud Semiconductors Venture Capital Valuations |
ValuationsMarket valuations are stretched with the tech sector's forward P/E at 30x and price-to-sales at 10x, over 40% higher than the tech bubble peak. The S&P 500's forward P/E ended September at 23x, approaching the dot-com peak of 24x. The top ten S&P 500 holdings now make up a record 39% of the index. |
Price Earnings Concentration Bubble Risk Overvaluation | |
RatesThe Federal Reserve cut interest rates by 0.25% in September citing labor market concerns, despite inflation remaining above the 2% target. The Fed's dual mandate appears suspended between caution and complacency, cutting rates amid modest labor softening while inflation persists above target. |
Federal Reserve Inflation Employment Monetary Policy Economic Policy | |
Small CapsU.S. small-cap stocks led performance gaining 12% in Q3, pushing the Russell 2000 into positive territory for the first time in 2025 and to its highest level since November 2021. Small caps outperformed large caps both domestically and internationally during the quarter. |
Russell 2000 Outperformance Recovery Value Opportunity | |
| 2025 Q2 |
Trade PolicyThe quarter began with sweeping tariffs including a baseline 10% on nearly all imports, bringing the average U.S. tariff rate to 22.5% from 2.4%. A 90-day pause was announced due to Treasury market volatility. Trade deals were struck with China on rare earth minerals, and Vietnam agreed to a 20% duty structure. |
Tariffs Trade China Vietnam Imports |
RatesThe 10-year Treasury yield saw its largest weekly increase since 2001, rising from 4.0% to 4.5% during the tariff announcement. The Fed maintained expectations for two rate cuts before year-end while keeping rates on hold. Markets are pricing in two to three rate cuts by December 2025. |
Treasury Fed Rate Cuts Yields FOMC | |
InflationJune marked three years since headline inflation reached 9.1%. Inflation has gradually trended toward the Fed's 2% target, with headline inflation at 2.4% year-over-year in May and core inflation at 2.8%. Shelter costs remain the largest contributor to elevated prices. |
CPI Shelter Fed Target Core Headline | |
| 2025 Q1 |
Trade PolicyThe Trump administration is implementing aggressive targeted tariffs as both a negotiating tool and macroeconomic strategy to protect domestic industries and encourage reshoring. Several countries have already proposed tariff cuts on U.S. imports to avoid reciprocal tariffs, while global corporations have pledged nearly $1 trillion in U.S. investment since Trump's inauguration. The administration views tariffs as part of a broader economic gambit to restructure global trade and reduce the fiscal deficit. |
Tariffs Reshoring Trade War Negotiations Investment |
Defense SpendingEuropean markets were boosted by an $860 billion defense spending package, helping push the MSCI Europe up 11% during the quarter. This significant defense investment contributed to European equities having their strongest quarter relative to the S&P 500 since September 1985. |
Defense Europe Military Spending Investment | |
InflationInflation remains sticky but shows promising signs, with headline inflation easing from 3.0% to 2.8% in February aided by declines in food and energy prices. Core inflation rose at the slowest pace since April 2021, while consumer inflation expectations notably diverged based on political affiliation, with Democrats expecting inflation to rise to 6.5% and Republicans believing it will disappear. |
CPI Core Expectations Fed Policy | |
RatesThe Federal Reserve kept interest rates unchanged at its March meeting but still anticipates two 0.25% rate reductions for 2025, while market expectations increased to three cuts with the first expected in June. The Fed also announced plans to slow quantitative tightening, reducing monthly runoff from $60 billion to $40 billion starting in April. |
Fed Cuts QT Policy Expectations |
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