In the Loop – October 23, 2026

Investors have plenty to worry about. Rising interest rates, geopolitical uncertainty, concerns about enormous investments in artificial intelligence, and tightening credit conditions have created an increasingly uncomfortable market environment. The question on everyone’s mind is understandable: Is this the beginning of something more serious, or simply a correction in an otherwise resilient economy?

We believe investors need perspective, not another prediction about where stocks will trade next week. Market volatility and economic deterioration are not the same thing. Our near-term outlook remains cautious as markets adjust to higher borrowing costs, elevated valuations, and uncertainty surrounding corporate earnings. However, we do not believe these challenges necessarily signal the end of the economic expansion. Our Two-Speed Economy framework continues to favor businesses benefiting from investment in power, infrastructure, domestic manufacturing, defense, and artificial intelligence.

Markets may also be positioning more defensively ahead of the November 3 midterm elections. Elections introduce uncertainty over future policy, taxes, spending, and regulation. Investors may be reducing risk ahead of a potential market-clearing.

When uncertainty begins to resolve, valuations reset, and buyers become more willing to commit capital. History offers an encouraging perspective: following each of the last 19 midterm elections dating back to 1950, the S&P 500 was higher 12 months later, averaging approximately a 15% gain. While past performance is no guarantee of future results, this pattern suggests that removing uncertainty can be an important catalyst. Sometimes markets recover not because all the news becomes good, but because the outlook becomes clearer.

Two prominent Wall Street investors offered interesting perspectives this week. Ken Griffin, billionaire founder of Citadel, believes we are “almost certainly” experiencing an AI bubble, but cautioned that bubbles often accompany transformative technologies. He compared today’s enthusiasm to the internet boom of the late 1990s. He also told a short funny story of how his son asked him what it was like before the internet. While AI may transform the economy, we do not want to over-invest within the speculative areas. Bill Ackman, founder of Pershing Square, takes a more optimistic view, arguing that geopolitical uncertainty, elevated energy prices, and high interest rates are weighing on otherwise healthy businesses. He believes easing pressures could set the stage for a meaningful market recovery in 2027.

Our outlook is cautious near term but constructive longer term, and our positioning reflects that distinction. We are emphasizing quality over speculation, favoring companies with strong balance sheets, sustainable free cash flow, pricing power, and limited refinancing risk. Within our Two-Speed framework, we continue to favor the companies supplying the power, equipment, technology, and infrastructure necessary for America’s next investment cycle. We are avoiding businesses whose valuations depend on flawless execution or continued access to inexpensive capital, while maintaining the flexibility to take advantage of attractive prices as opportunities emerge.

What does this mean for investors? The most important thing is to stay focused on your long-term financial goals rather than the market’s daily headlines. We want to make sure you have the cash you need for upcoming expenses, that your investments remain appropriately diversified, and that you are not taking more risk than necessary. Behind the scenes, we are carefully reviewing the companies you own, making adjustments where appropriate, and looking for opportunities to buy strong businesses at more attractive prices. There is no need to rush into the market or rush out of it. Our goal is to protect the progress you have made while keeping your portfolio positioned to participate when markets recover.