INVESTING WITH PURPOSE

SPRING MARKET UPDATE – 2026

KEY POINTS:

INTRODUCTION

With the long winter finally behind us and spring well underway in New England, we wanted to take this opportunity to share our view of the market, the economy, and how we are positioning portfolios for the period ahead. The first four months of the year have been a useful reminder that markets do not move in straight lines, and that the value of a long-term plan is most evident when the headlines feel loudest.

Last year was an exciting time for the firm as we added many new faces and increased our depth and in-house capabilities. That said, our ever-present focus and mission remains simple: to provide personalized wealth management services to individuals. As fiduciaries, we are solely focused on your best interests, and the depth we have added to the team has only enhanced our ability to execute that mission.

As investors, a long-term view is paramount to success. The day-to-day movement of the market is much like the New England weather cycle from January to August, we will have some wonderful days and some that make us question our sanity for living here, but inevitably we are rewarded with the warmth and joy of a New England summer.

It is important to note that our underlying investment philosophy is to invest with purpose. At its core, it is the intention to invest to facilitate a result or achieve a client’s goal, not to mirror what others do or mimic an index. Each client is unique, and investing for individuals is fundamentally different from the institutional investing that often dominates the airwaves on CNBC and other media outlets.

When we invest for clients, we must consider the timing of cash flows, withdrawals, and the tax consequences of our actions. Some individuals wish to leave a legacy; others prefer to enjoy the moment and spend the mythical last dime as they take their final breath. Meeting those individual goals rather than chasing a generic Wall Street benchmark is what drives us in our day-to-day pursuits.

While we have experienced a great deal of growth over the past year, we have not done so in a way that betrays our soul as investors and, more importantly, as your financial partner. We continue to be client-focused and dedicated to putting your interests first as a fiduciary partnering with you to help you meet your financial goals.

MARKET AND ECONOMIC OUTLOOK

The opening four months of 2026 have been a study in contrasts. The S&P 500 posted its worst first quarter since 2022, declining roughly 5% as the conflict between the U.S.–Israel coalition and Iran escalated, and energy prices surged. April, however, brought a remarkable rebound, with the S&P 500 and Nasdaq both establishing new record highs late in the month, supported by resilient corporate earnings and renewed enthusiasm around artificial intelligence.

Our long-term investment philosophy has not changed. Markets periodically face economic, political, and geopolitical shocks, but the long-term drivers of wealth creation remain remarkably consistent: innovation, productivity, and the ability of exceptional businesses to compound capital over time. Periods of dislocation often produce the best opportunities for disciplined investors.

In this letter, we outline our view of the macroeconomic backdrop, the evolving situation in the Persian Gulf, and how we are positioning portfolios as we move toward mid-year.

The Economic Backdrop

The U.S. economy has slowed but remains in expansion. Q4 2025 GDP came in at roughly 1%, consumer balance sheets remain reasonably healthy, and corporate investment, particularly in technology infrastructure continues to accelerate. We continue to describe the economy as being in a late-mid cycle phase.

At the same time, several moderating forces are clearly visible:

The Federal Reserve is expected to hold the federal funds rate at 3.50%–3.75% at its meeting this week. This is widely anticipated to be Chair Jerome Powell’s final meeting, with former Fed Governor Kevin Warsh nominated as his successor and likely to be seated by the June meeting. Mr. Warsh has publicly affirmed a commitment to Fed independence; nevertheless, a leadership transition during a period of elevated inflation and geopolitical stress adds another variable for markets to digest. Futures markets are pricing in little to no chance of a near-term cut, with the path forward dependent on whether energy-driven inflation proves transitory.

The structural shift we see is that the world has moved into a higher nominal growth and higher interest rate regime than it was in from 2010 to 2021. In such an environment, capital discipline matters more. Businesses with strong balance sheets, durable competitive advantages, and robust free-cash-flow generation tend to outperform.

The Iran Crisis and Energy Markets

Recent tensions involving Iran have added a new layer of geopolitical uncertainty.

The region is strategically critical because the Strait of Hormuz remains one of the most important energy chokepoints in the world, historically responsible for roughly one-fifth of global oil shipments.

Escalation between Iran and regional powers has increased the risk of supply disruptions. Even the perception of risk in this corridor has been enough to push oil prices higher and inject volatility into global markets.

Energy markets react quickly to geopolitical shocks for several reasons:

  1. Oil supply disruptions can occur suddenly
  2. Shipping insurance and tanker routes can change overnight
  3. Global spare capacity is relatively limited

For investors, the most important transmission mechanism is inflation. Rising oil prices affect transportation, manufacturing costs, and consumer spending. If sustained, higher energy prices could slow the disinflationary trend that central banks have worked to achieve over the past two years.

However, history suggests that many geopolitical oil shocks produce temporary price spikes rather than permanent supply changes, unless infrastructure damage or long-term conflict materially reduces global production. Markets are currently pricing in a risk premium for potential supply disruption, rather than a permanent shift in the global energy balance.

Market Structure: Concentrated Leadership

Another defining feature of this market is the continued concentration of returns among a relatively small group of companies. After a period earlier in the year when leadership appeared to be broadening, April’s rebound was again led by large-cap technology, communication services, and consumer discretionary names. 

These firms benefit from structural advantages including:

The most significant investment cycle currently underway is the massive expansion of artificial intelligence infrastructure, including advanced computing, data centers, and specialized semiconductor capacity.

This wave of capital spending resembles earlier industrial transformations such as electrification and the early internet buildout.

Technological revolutions rarely unfold in a straight line. Periods of enthusiasm are often followed by volatility. Yet the long-term productivity gains they produce can be profound.

For long-term investors, the objective is not to predict short-term cycles but to identify the businesses most likely to emerge as enduring leaders.

Portfolio Positioning

Considering the current environment, our portfolios remain focused on several structural themes that we believe will drive long-term returns.

1. Artificial Intelligence and Digital Infrastructure

The global economy is entering what may prove to be the largest computing infrastructure buildout in decades.

Demand for:

Companies enabling this ecosystem, particularly those with technological leadership and significant capital investment capacity are likely to benefit from a multi-year structural tailwind.

Importantly, we remain selective. Technological enthusiasm can lead to speculative excess. Our focus remains on businesses with durable competitive advantages and sustainable economics.

2. Energy and Energy Infrastructure

The Iran crisis highlights a broader reality: energy security remains a central geopolitical priority.

Even as the global energy transition progresses, the world remains heavily dependent on hydrocarbons.

This creates a complex investment environment in which both traditional energy producers and infrastructure companies may benefit from structural supply constraints and underinvestment.

Additionally, energy infrastructure, including pipelines, storage, and transport, often benefits from stable, long-term cash flows.

3. Defense and National Security

Rising geopolitical tensions have led many governments to significantly increase defense spending.  Recent conflicts and regional instability have reinforced the importance of military readiness, advanced technology, and cybersecurity capabilities.  This trend has been particularly evident among NATO countries and U.S. allies.

Defense spending tends to follow multi-year cycles, often continuing long after the initial geopolitical catalyst. As a result, companies operating in aerospace, defense systems, and advanced security technologies may benefit from a sustained increase in government investment.

4. High-Quality Global Franchises

While thematic investments can be powerful, the foundation of our portfolio remains ownership of exceptional businesses across industries.

These companies typically share several characteristics:

Businesses with these attributes tend to compound capital effectively across economic cycles.

Looking Ahead: The Next 12–24 Months

Forecasting short-term market movements is inherently difficult. However, several dynamics are likely to shape the investment landscape over the coming two years.

1. Continued Volatility

Geopolitical tensions, elections, and monetary policy shifts will likely produce periodic market dislocations. 

2. AI Investment Acceleration

Corporate spending on AI infrastructure remains one of the strongest drivers of capital investment globally. We expect this to remain the case, though periodic digestion phases should be anticipated. 

3. Energy Market Sensitivity

Energy prices will likely remain sensitive to geopolitical developments, particularly in the Middle East.

4. Higher Interest Rate Baseline

Even if central banks gradually reduce rates, the long-term baseline for interest rates may remain structurally higher than in the previous decade.

In such an environment, investors should expect markets to be more volatile but also more discriminating, rewarding businesses with genuine economic strength.

In addition to our investments in individual stocks, bonds and what we perceive to be high quality focused domestic and international funds, we will look to utilize buffered ETFs that attempt to limit volatility and covered call ETFs that can provide additional income to a portfolio.  It is important to note that both strategies may not perform as well as the S&P 500 during a strongly rising market.  We think, however, for clients who need more predictability to cash flow and risk moderation they may make sense.

Closing Thoughts

Uncertainty is an unavoidable aspect of investing. Markets have historically navigated wars, geopolitical crises, inflation shocks, and technological disruption. The April rebound, with major indices hitting new highs even amid an active Middle East conflict is a useful, if unusual, reminder that markets and headlines do not always move together. Through each of these periods, the long-term trajectory of economic progress has remained intact.

Our objective remains straightforward: to identify and own exceptional businesses capable of compounding capital over many years, while maintaining the discipline and patience required to navigate short-term volatility. We believe that maintaining this long-term perspective is the most reliable way to build and preserve wealth across market cycles.

Thank you for your continued trust and partnership.

Disclosure:

Past performance is not indicative of future results.  This update may contain forward looking statements that may or may not occur.  BlueDoor is under no obligation to update this article should it materially change its basis for these conclusions.  Asset allocation and investment decisions should be tailored to each client’s individual needs.  Should your circumstance ever change from an agreed upon strategy please update us immediately. For complete disclosures and our Form ADV please visit www.bluedoorprivate.com or our ADV Part 1 and 2A on the SEC’s website.