Current Outlook & Portfolio Strategy
Posted on April 7, 2026
The first quarter of 2026 was marked by familiar themes with developments in AI leading the early narrative, with an abrupt pivot to energy geopolitics in the back half. In fact, for the month of March, the S&P 500 has been almost entirely driven by the daily price movements of oil and headlines from the Middle East theater.
There are innumerable knock-on impacts should the conflict become protracted and result in a lasting curtailment of energy supply. Energy and its many derivatives are critical in fertilizers (phosphates and nitrates); helium for microchip production; naphtha for chemicals and the pharma industry; various grades of refined fuel, ie. jet fuel for planes, fuel oil for ships. This list is hardly exhaustive—simply put, there is no alternative to the world’s reliance on nonrenewable energy.
The inability of oil to pass through the 22-mile wide Hormuz Strait has reverberations 7,000 miles away at the Eccles Building in Washington, where Jerome Powell, Chair of the Federal Reserve, presides over yet another macroeconomic challenge, having already charted the US’s monetary course through Covid, Russia’s invasion of Ukraine, and last year’s uneven tariff rollout.
Depending on the trajectory and duration of the conflict, the spike in energy prices could prove durable and highly inflationary, or, transitory and largely short-term noise. And then there are overlapping growth and employment impacts of the two scenarios to consider. Under this fog, for now the safest and most prudent course is to wait and do nothing to rates—the outcome of the Fed’s March 18th meeting. Indeed, the market’s expectation is for “nothing” at the next several Fed meetings, which contrasts with hopes of 2-3 rate cuts as we entered 2026.
The artificial intelligence (AI) narrative remains top-of-mind for the market and replete with headlines, innovations, and in some cases, disruptions that ripple into technology incumbents’ products, offerings, and valuation. For example, a product update from Anthropic’s Claude model in late January triggered a broad sell-off in software companies like Salesforce, Adobe, Workday, Intuit, and others.
This “SaaS-pocalypse” (SaaS – Software as a Service) has infected another corner of the market: private credit. Touted as the “next big thing” in financial innovation, private credit is a pooled, actively managed loan book, originated by non-bank institutions (hence “private”), extended to smaller, more highly leveraged firms that often lack access to traditional bank lending or public bond markets.
The inherent attraction to investors is the higher return profile, compensating for elevated credit risk and limited liquidity should investors wish to exit. These vehicles have been gaining a foothold in some asset allocators’ toolkits, particularly where liquidity needs are low, predictable, and/or multi-generational.
Lately, both the risk and liquidity aspects of these vehicles have come to the fore. By some estimates, the concentration of software and technology companies within private credit portfolios may exceed 30%. This concentration has raised questions about the underlying credit quality of borrowers, the reliability of valuation marks on these loan books, and the potential for meaningful losses should AI meaningfully upend their business models.
Elsewhere, precious metals have continued their ascent in 2026, although a degree of speculative fervor has entered their daily price movements. But as our colleagues argue in their adjacent column, there is a secular demand story that underpins a long-term investment thesis.
In summary, the long slumbering energy complex has awoken as both a sector outperformer (up 37% YTD) and potential market spoiler should these fraught conditions persist. The Portfolio Management team at Florida Trust remains vigilant to the risks and opportunities that may come from this hopefully brief moment of turmoil.
Kristian R Jhamb, MBA, CFA
Chief Investment Officer
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