Q1 2026 Investment Commentary
War, Oil & Your Portfolio
The first quarter of 2026 started exactly the way we hoped — then, on the last day of February, everything changed. Here's what happened, what it means for your money, and why we're not changing course.
Q1 Return
(wrong reasons)
Portfolio Q1
A Strong Start — Then a Sharp Turn
The first quarter of 2026 started on a promising note. Through late February, the S&P 500 had climbed 1%, Small-Cap Value Stocks were up 9%, Developed International stocks like Europe, South Korea, and Japan had topped 10% gains, and Emerging Markets were up nearly 15%. Corporate and Municipal Bonds had each gained roughly 2%, and Gold had quietly climbed 20% after a solid 2025.
Then, on the last day of February, the escalating conflict between the U.S., Israel, and Iran sparked a sharp sell-off throughout March. By quarter end, the S&P 500 had dropped nearly 5%. Small Cap Value stocks gave back about half of their early gains, International Developed Markets slipped into negative territory, and most corporate and muni bonds surrendered their year-to-date gains.
The standout performer — for all the wrong reasons — was Oil, which spiked nearly 65% year-to-date.
What This Conflict Means for Your Portfolio
Iran continues to flex its influence over the Strait of Hormuz, which carries nearly a quarter of the world's oil exports. While the United States has made meaningful strides toward energy independence, many of our key trading partners have not. In the Philippines, for example, gas prices have roughly doubled since the conflict began, and up to 98% of their fuel supply passes through the Strait.
The longer this drags on, the more potent its ripple effects on the global economy — and that's already showing up at the pump here at home.
| Regular | Mid-Grade | Premium | Diesel | E85 | |
|---|---|---|---|---|---|
| Current Avg. | $4.064 | $4.578 | $4.943 | $5.490 | $3.208 |
| Yesterday Avg. | $4.018 | $4.541 | $4.904 | $5.454 | $3.149 |
| Week Ago Avg. | $3.983 | $4.498 | $4.864 | $5.366 | $3.160 |
| Month Ago Avg. | $2.984 | $3.482 | $3.851 | $3.761 | $2.319 |
| Year Ago Avg. | $3.201 | $3.672 | $4.029 | $3.613 | $2.674 |
History Says: Stay the Course
We know this feels uncomfortable. A conflict in the Middle East, spiking oil prices, a stuttering stock market — it's the kind of environment that makes you want to do something. But the data consistently points in one direction: staying invested typically outperforms reacting.
We looked at every major geopolitical conflict since World War II. The pattern holds: short-term volatility, long-term resilience. Markets that stumbled in the 3-month window after major conflicts often recovered meaningfully at the 1-year and 3-year marks.
The same pattern holds internationally — and in many cases even more strongly. Non-U.S. developed markets and emerging markets have historically recovered from geopolitical shocks as well, reinforcing the case for global diversification.
The Case for Staying Diversified
Despite all of this, a typical diversified portfolio is close to flat on the year. That's not a bad place to be, all things considered — and it's exactly what diversification is designed to do.
The steepest losses this quarter were concentrated in large U.S. equities — the very part of the market that led the way for years. The best gains were in commodities and real assets like real estate. Bonds have taken a temporary hit as inflation expectations and rate cut assumptions for 2026 were repriced in response to the conflict, but they remain an important stabilizer.
💡 This quarter is a useful reminder: the years when diversification "costs" you performance are often immediately followed by the years when it saves you. The portfolio built for the good times needs to be the same one that protects you in moments like this.
Private Credit: Worth Watching Closely
Before the conflict took center stage, one of the bigger stories in markets was growing scrutiny of the private credit space. Default rates have risen, and several private credit investment funds have tightened redemption terms or restricted investor withdrawals.
Private credit has boomed since the Global Financial Crisis as an alternative financing source for companies paying high yields to investors. Historically, these investments lived inside endowments and insurance company portfolios — with long time horizons and very different liquidity needs than individual investors. In recent years, they've increasingly made their way into retail hands.
⚠️ We've intentionally kept our portfolios away from the private credit space. If something is offering 10–12% interest, there's typically a reason — and it's not generosity. Companies like Blue Owl, a major player in private credit, have seen their stock drop roughly 40% year-to-date.
A Silver Lining: Valuations Are Improving
One genuine bright spot from the recent sell-off: equity valuations in the U.S. have improved. The S&P 500 is still relatively expensive on a historical basis, but the valuation gap between the top 10 companies and the rest of the market has narrowed meaningfully — a healthier, more sustainable foundation for the next leg of the market.
Looking Ahead: The IPO Pipeline
The March sell-off has spooked or delayed some IPO plans, but a meaningful pipeline of major companies is still eyeing a liquidity event in the months ahead. If market conditions stabilize, the IPO window could reopen — and several names below are ones our clients know well. If you hold equity in any of these companies, now is a great time to revisit your plan with your BKFi planner.
| Company | Business Description | Est. Sales ($mm) |
Est. Valuation ($mm) |
|---|---|---|---|
| SpaceX | Produces rockets for space travel and a global satellite internet network. | $15,500 | $1,250,000 |
| OpenAI Group | Developer of AI models and applications, including ChatGPT. | $25,000 | $730,000 |
| Anthropic | Developer of a foundational LLM known for its AI assistant Claude. | $19,000 | $380,000 |
| Databricks | Provides an enterprise SaaS platform for AI-driven big data analytics. | $5,160 | $134,000 |
| Cerebras Systems | Designs and produces chips and supercomputers for AI services. | $206 | $23,000 |
| DayOne Data Centers | Singapore-based global data center developer and operator. | — | $20,000 |
| Inspire Brands | Franchises Arby's, Buffalo Wild Wings, Dunkin', and other restaurants. | $32,600 | $20,000 |
| Proofpoint | Provides enterprise software for threat detection and data protection. | $2,000 | $20,000 |
| Quantinuum | Quantum computer developer. | — | $17,500 |
| Zelis Healthcare | Provides health insurers with a platform for claims management. | — | $17,000 |
| Discord | Provides a gaming-focused voice chat service and social network. | $550 | $15,000 |
| Innio Group | Producer of natural gas engines and power generation systems. | $2,500 | $15,000 |
| Copeland | Produces HVAC equipment, thermostats, and monitoring systems. | $4,700 | $14,000 |
| Ensemble Health | Provides a platform for healthcare revenue cycle management. | — | $13,000 |
| Holtec International | Provides nuclear plant equipment and develops small modular reactors. | $500 | $10,000 |
| Strava | Provides a subscription-based fitness tracking app. | $500 | $2,200 |
Your plan was built for moments like this.
Questions about your portfolio or equity compensation? Your BKFi planner is here.
Disclosures: All investments involve risk, including the loss of principal. This document contains forward-looking statements reflecting our beliefs and opinions in respect of the future. Forward-looking statements necessarily involve risks and uncertainties, and undue reliance should not be placed on them. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements.
Past performance is not indicative of future results. The information provided herein is for educational purposes only and does not constitute investment advice. Please consult with your BKFi advisor before making any investment decisions.