Quarterly Insights: April 2026
After a period of relative calm, the markets began 2026 on shaky footing. Equity markets are down modestly year-to-date as the U.S. finds itself in a conflict with Iran and investors are also thinking harder about the winners and losers of AI. While these dynamics warrant attention, we also see this as an opportunity to reaffirm our long-term approach.
Navigating Geopolitical Uncertainty
The conflict with Iran and the ensuing closure of the Strait of Hormuz – a vital passage for about one-third of globally traded crude oil – have driven energy prices higher, introducing new inflationary pressures. A near-term resolution is possible, but a conflict of this nature is inherently difficult to make predictions on. As of this writing, a ceasefire has taken hold, but the situation remains fragile especially as key issues remain unresolved, including Iran’s nuclear program.
While the headlines are worrisome and the cost of the conflict is significant, history provides reassuring perspective. Past conflicts reveal a consistent pattern: an initial market selloff driven by uncertainty, followed by recovery that often left long-term investors significantly better off than those who fled to the sidelines. On average, the 12-month return following a war’s onset has been positive, in many cases strongly so. This historical evidence reinforces our view that investors should resist the temptation to make dramatic portfolio changes based on headlines. Wars, like other crises, eventually end, and markets have repeatedly demonstrated their ability to look past near-term disruptions.
The AI Market Paradox
Meanwhile, a different kind of uncertainty has dominated the technology sector. Investors are increasingly scrutinizing the enormous sums flowing into AI infrastructure. For context, the major “hyperscalers” — Amazon, Google, Meta, and Microsoft — are projected to spend roughly $700 billion in 2026, a dramatic step up from an already elevated 2025. At the same time, software stocks have sold off sharply on fears that AI agents will upend their business models.
Some observers are calling this the AI paradox: how can investors doubt AI’s profitability while simultaneously fearing its disruptive power? We think both narratives can coexist. The infrastructure buildout will produce genuinely useful tools capable of transforming longstanding workflows. Yet the sheer scale of capital alongside fierce competition means many will fail to recoup their investments, let alone deliver respectable returns. This would be entirely consistent with the classic technology hype cycle: capital floods in faster than practical use cases can absorb it, a shakeout follows, and eventually the market rewards operators with sustainable models and genuine value creation.
We believe this year’s sell-off has created opportunity. Our internal work has helped us identify software incumbents who we believe will emerge intact — particularly those with deep domain expertise anchored in proprietary data. Investors tend to underestimate what enterprise software relationships actually provide: not just a well-packaged tool, but customer support, compliance, integrations, and someone to hold accountable when things go wrong. That bundle of value is harder to disrupt than it appears.
Our Perspective on the IPO Environment
Several high-profile IPOs are on deck for 2026, including SpaceX, which could be the largest public offering in history. The headline companies preparing to go public are exciting businesses with compelling growth narratives. However, history counsels patience. The Facebook (now Meta) IPO generated similar excitement in 2012, yet the stock declined for more than a year before finding its footing. The base rate on early returns from IPOs warrants caution: most underperform in their first 12 months as initial enthusiasm gives way to the reality of quarterly earnings cycles and expirations on lockups for pre-IPO investors. We generally advise clients to let the initial frenzy settle before considering a position in newly public companies.
Looking Ahead
Most asset classes have faced headwinds this year. Equities, gold, and even long-dated government bonds have sold off amid inflation fears and government deficit concerns. Our portfolios have held up relatively well in this environment. The silver lining is that new pockets of value have emerged in areas including small and mid-sized company equities, international equities, and select opportunities in industrials, technology, and healthcare.
We continue to counsel against a short-term mentality of finding places to “hide out.” Such a strategy requires the near-impossible task of timing both market exit and re-entry. While our holdings may experience temporary price swings, those movements often mask underlying fundamentals that remain sound.
As we look ahead, key signposts to watch include progress on Iran ceasefire negotiations, the Federal Reserve’s policy trajectory, and the upcoming earnings season. We remain alert to emerging opportunities and committed to building portfolios that can serve our clients through all market conditions.
The above information is for educational purposes and should not be considered a recommendation or investment advice. Investing in securities can result in loss of capital. Past performance is no guarantee of future performance.
