"War is the continuation of politics by other means." -- Carl von Clausewitz

 

The escalating conflict in Iran has quickly become this quarter's defining force in global markets-understandably unsettling investors worldwide. It is another challenging start to the week, and many are anxious about the headlines. Yet, as history consistently shows, while geopolitical shocks often trigger sharp sell-offs, their longer-term impact on disciplined investors is usually limited.

 

When Russia invaded Ukraine in early 2022, markets fell sharply and volatility surged. Oil prices spiked to around $124 a barrel, amplifying fears of inflation and recession-but within months, both markets and energy prices stabilized, and stocks recovered their losses. Timing that decline and rebound perfectly-selling shortly after the invasion and buying back near the June lows without clear improvement-would have required near-clairvoyance. Far better, and far more realistic, was to stay invested and let fundamentals reassert themselves. The same principle applies now.

 

The recent closure of the Strait of Hormuz, which affects roughly 14 million barrels of daily oil flow, has reignited inflation worries and delayed expectations for Federal Reserve rate cuts. Energy markets may remain volatile in the short term, but this disruption is temporary. Oil will find its way into global supply-through the U.S., Saudi Arabia, and Africa-and prices should stabilize as production adjusts. When that happens, inflation expectations will ease, rates will decline, and market fundamentals will again lead the way forward.

 

Our portfolio strategy remains grounded in balance, liquidity, and flexibility. Earlier this year, our increased exposure to international markets added valuable diversification as global growth prospects improved. That allocation was sound at the time, helping reduce concentration risk and capture opportunities abroad. However, current geopolitical tensions and renewed U.S. economic strength reaffirm why we view the U.S. as the foundation of a long-term portfolio. America's energy independence, economic resilience, and the dollar's continued strength offer meaningful advantages. Looking ahead, maintaining a modest U.S. overweight remains our preferred long-term approach-anchoring stability at home while allowing selective global exposure for diversification. This is what Warren Buffett calls our "home-field advantage."

 

Short-term volatility can feel uncomfortable, especially when headlines emphasize worst-case scenarios-whether rising oil prices or stress in private credit markets. But markets tend to overreact in such moments, just as they did in 2022 or during 2026's tariff turmoil. These periods often create opportunity for those with patience and perspective. As contrarian as it may feel, oversold markets are when disciplined investors find value. Our current posture reflects that: we remain more interested in buying than selling.

 

While it's never encouraging to see oil climb toward $150 a barrel, the market's response to that pressure can ultimately be bullish. As oil prices normalize and rates begin to ease, the setup for recovery strengthens-and those who panic now risk missing that rebound. History has shown time and again that rallies often begin long before the news feels reassuring.

 

Through all this, our commitment stands: to manage your portfolio with discipline. We'll continue rebalancing thoughtfully, uncovering opportunity amid dislocation, and safeguarding your long-term goals.

 

Thank you, as always, for your continued trust and partnership. Please do not hesitate to reach out if you'd like to discuss how these developments may affect your strategy.