Category: Quarterly Market Perspectives

Recent heavy stock market trading volume has helped fuel earnings at large US banks. “Executives and analysts say that institutional clients are now constantly repositioning their portfolios, reacting to major geopolitical events and dramatic market volatility, seeking to cash in on big gains and protect themselves from a potential drop.”[1]  As the title of a recent WSJ article says (“Wall Street Traders Enjoying Their Best Year Ever”), this is the very definition of trading, as opposed to investing. It is, though, just the internal workings of the market.

One of the factors driving major geopolitical events is trade imbalances. For the US, the current administration’s efforts to correct what they view as decades of mistakes in setting US trade policy have been a factor, but probably not as large a negative factor for the US economy as predicted at the start of the tariff-imposition process. The Europeans have now begun to realize that they need to push back against mercantilist China. The latest domestic problems in China mean that “absent any other convenient alternative, the Chinese aspire to export their excess domestic capacity rather than risking a debt-deflation spiral at home.”[2]

After eight years under Jerome Powell, the Federal Reserve has a new chairman, Kevin Warsh, and with him comes the possibility of a new monetary regime. We have to consider how the new Fed might change its approach to monetary policy and what the implications of a different approach will be for capital markets. The Federal Open Market Committee (FOMC), responsible for setting monetary policy, is comprised of twelve voting members. If Warsh is to change how monetary policy is set, he will have to sway the other members to his way of thinking, and he may or may not be successful. However, the chairman still has considerable influence over the agenda and how the Fed is run.

There seems to be virtually insatiable demand for artificial intelligence (AI) and the compute capacity that powers it. The industry has an “if you build it, they will come” aspect to it: Any additional capacity is readily absorbed. Demand is coming from much more than just large language models (LLMs), graphics engines, and AI agents. Autonomous driving and robotics (physical AI) are two other large applications, and there are many more. The AI investment thesis used to be simple: “AI will grow.” Now, the investment thesis is more complicated, and that complexity isn’t attracting new investors. LLMs are proliferating, with greater competition resulting in pricing pressure. Lower LLM prices may stimulate even more demand, while AI service providers and their users will still have to pay for compute capacity. We will see if other AI applications face similar competitive pressures.

There are currently two  types of retirement accounts labeled “Trump.” One is TrumpIRA, which is a “government website (TrumpIRA.gov) that provides links to and information about IRAs from private-sector financial institutions that meet certain Treasury-specific criteria.” The program is “set to launch by January 1, 2027, (and) the site will allow savers to compare IRAs from different financial institutions based on criteria such as fees and investment options. The site will also share information about eligibility and instructions for claiming the Saver’s Match, which would match eligible savers’ contributions up to certain thresholds, depending on their income.”

Sometimes the most important reaction to a new, bad idea is “just say no.”[1] A subtle variation on that theme is evolving now at the US Department of Labor (DOL). On March 30, 2026, the DOL released its long-awaited proposed regulation entitled “Fiduciary Duties in Selecting Designated Investment Alternatives” in response to President Trump’s Executive Order that calls for expanded access to private equity and other alternative investments for 401(k) plans and their participants.”[2] However, “the proposed rule offers an expansive view of fiduciary prudence under ERISA with respect to the selection of any designated investment alternative, which is consistent with DOL’s historically neutral posture that neither favors nor disfavors any particular type of investment or investment strategy.”[3]

Great stocks don’t perform every year and an underperforming year isn’t a good reason to sell one. When a stock goes down, investors often assume something must be wrong with the company operationally, but that isn’t necessarily so. Investors can get obsessed with short-term issues that are readily resolved within a year. Stock prices should be related to the long-term value of the company, but investors can get distracted, swaying market values.

The S&P 500 declined 4.3% in the first quarter of 2026, driven primarily by the outbreak of the war in Iran and the resulting surge in oil prices. A less obvious but meaningful contributor to the decline was the historic collapse in software industry stocks. Software stocks in the S&P 500 fell 23.9% in Q1 and underperformed the index by the most in decades (see Figure 1 – next page).[1] The software selloff began last fall and accelerated early this year with the release of agentic artificial intelligence (AI) software coding tools.[2] The central issue is that AI may threaten the profit margins and business models of many software companies by enabling customers to build their own software. AI continues to be a driving force for the economy and for markets driven by data center capital expenditure and the monetization of agentic AI. However, we must consider which companies and industries are most vulnerable to disruption and which are positioned to be beneficiaries.

Is there a more bullish condition than a stock price or an index price breaking out to all-time high ground on an absolute price basis?

The threats facing individuals in the financial world have grown more sophisticated—and more personal—than ever before.

A recent article on the use of disclaimers caught our attention.[1] The tightened rules for inherited IRAs make disclaimers a potentially useful tool. “A disclaimer is a legal document in which someone renounces an asset that was set to be inherited.”[2] As the article points out some “retirees and pre-retirees have traditional IRAs far larger than they expected.” The tightened rules require the inheritor to recognize ordinary income from the IRA over ten years. If the IRA not only lists a primary beneficiary but also contingent or secondary beneficiaries, then a disclaimer may prove useful for family tax planning by moving family income to members with lower tax rates.