Market Talk, First Quarter 2026

Markets had a bumpy start to the year, and we want to take a moment to put the quarter in context because the environment is a bit more manageable than the headlines might suggest.

The most notable fundamental change this quarter has been the move higher in rates, coinciding with the commencement of operations in the Middle East. Driven by renewed inflation concerns, investors now largely expect no rate cuts for the rest of 2026, compared to the two anticipated when we started the year. This echoes the Fed Chair Powell’s wait and see approach when responding to concerns about the Iran war and inflation; "We ‌feel like our policy's in a good place for us to wait and see how that turns out”.

This is despite the wave of high-profile job cuts from major tech companies, many of them driven by AI and automation, as total job losses still remain contained. This is the kind of market your portfolio is prepared for. Our underweight in big tech has helped insulate us from the weakness there, which is driven by both higher rates and investors questioning whether AI investment can continue at its current pace. 

We've used the selloff as an opportunity to look closer at software companies whose products are deeply embedded in how their customers operate day-to-day, with the kinds of systems that aren't easily ripped out or replaced. These companies are actually among the best-positioned to harness AI themselves, building intelligent tools on top of the data and customer relationships they've spent years developing. That makes them more valuable over time, not less. We feel similarly about cybersecurity. AI creates new risks as fast as it creates new efficiencies, and the demand for protection is only growing. The established leaders in this space have the scale and expertise to meet that demand and the recent selloff has allowed us to add to positions at better prices than we had earlier in the year.

Volatility is never comfortable, but it is normal and often where the best long-term opportunities are found. We enter the second quarter with portfolios that navigated a difficult environment well, with targeted additions we're confident in, and with a macro backdrop that continues to prove resilient. Sun Tzu said it best, “in the midst of chaos, there is also opportunity.”

Please reach out with any questions or concerns that may arise. Thank you for your continued trust in Westview.