Quarterly Newsletter 2026 Q2
The first quarter has flown by. It’s hard to believe that we are already in April. This first quarter was as eventful as we anticipated.
Israel and the United States have attacked the Islamic Revolutionary Guard Corps (IRGC). This has disrupted the oil markets driving up fuel prices, which is filtering throughout the world economy. Once the Strait of Hormuz is secured, oil prices should settle back down.
Venezuela in the process of organizing a new government that will hopefully be friendly with the United States and create a better economy for its citizens. Cuba may be next as the Trump Administration attempts to ally the Western Hemisphere.
The old saying, ‘The more things change, the more things stay the same.’ may need to be changed to, ‘The more things change, the more things change.’ Time will tell which is most applicable as the world shifts from being United States financed to the United States controlled.
2026 1st Quarter Review
Security prices across the board dropped during the first quarter due to uncertainty caused by Israel and US attacking Iran.
We were optimistic for the first quarter even though stock prices were high. We also stated that it wouldn’t take much of an event for stocks to decline due to high prices. As the oil markets have tightened, fuel prices have risen. This means less profits for companies and lower stock prices.
2026 2nd Quarter Preview
We were correct that any disruption could cause stocks to decline. This does not mean we have become pessimistic on stocks for 2026. Volatile stock prices are normal. It’s just a different reason. This time it’s due to oil market disruption from the Iranian conflict. We discuss oil prices in the, ‘Did You Know?’ section of this newsletter.
We are optimistic that the Strait of Hormuz will open in the near future. This can happen by force or a negotiated settlement. Either way, this should allow oil to flow out of the middle east again driving down fuel prices. This should mean higher security prices in the near future.
Bonds
Bond values also decreased in the first quarter due to uncertainty in the oil market. As mentioned above, we anticipate improvement in the near future. Bonds pay period dividends, which is one reason they are less risky than stocks. We generally use mutual funds for our bond holdings. This gives investors a larger number of bonds with differing dividend payment dates. Dividends are reinvested to buy additional bonds. While bond values are down, reinvested dividends buy more bonds that can appreciate later. This strategy is called ‘Internal Dollar Cost Averaging’.
We remain bullish on bonds for 2026 due to low bond valuations and likely interest rate decreases.
US Stocks
Stock prices decreased the second half of the first quarter. As mentioned in our first quarter newsletter, we could see sharp stock price decreases if there was a disruption in the economy. Oil price increases were exactly the kind of event that could do it.
Our view of the economy remains positive. One indicator was a much higher employment number than anticipated. This may be good time to rebalance your portfolio, which we do through our normal Risk Allocation models.
International
International stocks declined with almost every other security class in the first quarter. However, the consensus view is that international stocks still have above average upside. This is due to lower price per earnings (P/E ratio), decreasing dollar and profit increases.
We are also bullish on international stocks. However, we are not overweighting them by any means. We have increased the allocation in the aggressive models and added a small amount to the moderate models. The conservative models do not hold international stocks due to other low volatility securities being the priority.
Did You Know?
Oil prices have fluctuated within a wide range of prices over the past few decades. The graph below is from April 6, 2006 to April 6, 2026. While oil prices have gone up quickly, these prices have been hit before. It is unlikely that Saudi Arabia or other oil producing nations will increase production. This means that oil will have to move through the Strait of Hormuz before prices drop.
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