Investing has always meant making decisions today about a future no one can see clearly. Most of the time, that uncertainty hums quietly in the background. But in the first quarter of 2026, it roared.
Over the past three years, markets have been unusually strong. The S&P 500 returned 24% in 2023, 23% in 2024, and 16% in 2025, the best three-year stretch since the late 1990s. In the first three months of 2026, several large forces that had been building beneath the surface arrived all at once. As we were reminded, volatility has a way of testing both patience and conviction. That is what this letter is about.
Geopolitics and Energy
The quarter began on a strong note. On February 6th, the Dow Jones Industrial Average crossed 50,000 for the first time in its 130-year history. That momentum shifted abruptly on February 28th, when the U.S. and Israel launched military strikes against Iran.
The market’s reaction was swift. Oil rose from $72 per barrel before the strikes to a peak of $120 in mid-March, before settling near $100 by quarter-end on hopes of a ceasefire. Prices at the pump are up over a dollar since mid-February, highlighting the economy’s continued sensitivity to supply disruptions.
At the center of the anxiety is the Strait of Hormuz, through which 20% of the world’s oil and liquefied natural gas passes, and a third of global fertilizers flow. For nearly a month, the strait was virtually closed to commercial traffic, adding to concerns about higher prices.
Interest Rates and Inflation
Coming into 2026, homeowners were hopeful for lower interest rates, either to refinance or to finally trade houses. That optimism was shared more broadly across markets. Investors had penciled in two Federal Reserve interest rate cuts during the first half of 2026. By the end of March, however, expectations had shifted and investors at best were hoping for one rate cut in December.
Prices of goods and services are expected to climb again as the oil shock works its way through energy bills, grocery prices, and shipping costs. Deglobalization, tighter immigration policy, and rising energy demand from the buildout of artificial intelligence (AI) infrastructure may continue to keep prices elevated.
Data Centers and Private Credit
As we wrote about in our last quarterly letter, big technology companies are driving the largest capital expansion in history. Spending on data centers, which power AI, is expected to reach $650 billion this year, on top of $400 billion in 2025. Many of these companies are using much of their free cash flow for this buildout, while some are issuing debt to finance the remainder.
Private credit is lending that occurs outside the traditional banking system. This industry was born after the Great Financial Crisis when regulators restricted bank lending. Most of the borrowing for data centers flows through illiquid private credit funds, which now exceed $2 trillion in assets.
During the first quarter, several of these funds faced investor withdrawal requests above normal levels. Investors are trying to assess how rapid capital spending, rising leverage, and illiquid funding may affect not only AI but the broader economy.
Artificial Intelligence and Jobs
Right now, there are two very different stories about AI’s impact on the future, and nobody knows which one will prove correct. The “doomer” narrative warns that AI could eliminate a significant amount of entry-level white-collar jobs within the next few years. Because white-collar workers drive most of the consumer spending in the U.S., the economic impact could be substantial.
The “abundance” narrative sees things differently. Of course, AI will eliminate some jobs, but new industries will emerge that we cannot yet imagine, just like in past technological revolutions. In typical fashion, the initial hype around this new technology has turned to fear before the new normal sets in.
Consider 1908. The number of blacksmiths employed in the U.S. crossed 109,000. Then, the first Model T rolled off the assembly line. Twenty years later, blacksmiths had all but disappeared, while the automobile industry boomed and created entirely new jobs no one could have predicted: auto mechanics, road builders, insurance agents, gas station attendants, and more.
The same phenomenon happened with mainframes, PCs, the internet, smartphone, etc. Markets must price the future before we know which narrative wins.
The Power of Sound Advice
Mark Twain was one of America’s greatest storytellers, but he was also a cautionary tale when it came to investing. Despite his literary brilliance, Twain’s financial life was marked by speculation and bold bets on the “next big thing.”
In the 1880s, Twain invested more than $200,000 into a mechanical typesetting machine that was perpetually delayed and ultimately beaten to market by a simpler competitor. His publishing firm also collapsed under the weight of poor decisions, and by the mid-1890s, Twain was bankrupt and deeply in debt.
But with the help of Henry Huttleston Rogers, a friend and one of the era’s most respected business minds, Twain restructured his finances, avoided risky ventures, and refocused on his strengths of writing and lecturing. Doing so allowed Twain to repay his debts in full.
Today, we see a similar dynamic in the way artificial intelligence has captured investors’ imaginations. AI promises to reshape industries and create enormous opportunities, but speculation is rampant, and not every company will thrive or even survive.
Twain’s recovery required the steady hand of an expert who helped separate excitement from execution. In the same way, our role at Pittenger & Anderson is to help you navigate periods of rapid innovation with a disciplined approach, building portfolios on timeless principles: diversification, risk management, and patience.
Innovation can be a powerful driver of long-term returns, but successful investing isn’t about chasing every opportunity. It’s about aligning your portfolio with your goals, your plan, and your tolerance for risk.
The World According to P&A
We continue to believe that owning high-quality companies with durable competitive advantages, strong balance sheets, and capable leadership remains the best approach for long-term investors. We also believe that a well-constructed investment mix, one that doesn’t lean too heavily on any single sector or narrative, is more important now than it has been in years.
As we close this letter, if you’ve had a financial event recently, or expect one soon, whether a retirement, business sale, inheritance, or a desire for a new advisory relationship, we’d welcome the conversation. And if you know someone who could use a steady hand with their finances, we’re grateful for the introduction.
Our team continues to grow. Zabrina Roussan and Clay Finck have joined the P&A fold. We’re excited to have them and for you to meet them. Both will help P&A continue to offer the high level of service, communication, and planning your financial future relies on.
On behalf of the great team at P&A, thank you for being our client.
Jon J. Sevenker, CFP®
Senior Advisor/Principal
Dan Frost, CFA, CFP®
Senior Advisor & Portfolio Manager/Principal
The statements in this quarterly letter do not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or any other product or service by Pittenger & Anderson or any other third party regardless of whether this letter references such security, product, or service. To learn more about our firm and investment approach, check out our Form ADV.
Sources:
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- https://www.cnbc.com/quotes/@LCO.1
- https://pittand.com/2026/01/12/2025-4th-quarter-letter-field-of-dreams/
- https://www.reuters.com/business/big-tech-invest-about-650-billion-ai-2026-bridgewater-says-2026-02-23/
- https://fortune.com/2026/02/11/something-big-is-happening-ai-february-2020-moment-matt-shumer/
- https://x.com/cboyack/status/2021647373571862952
- https://www.citriniresearch.com/p/2028gic
- https://michaelxbloch.substack.com/p/the-2028-global-intelligence-boom
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Pittenger & Anderson, Inc. does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Additionally, the information presented here is not intended to be a recommendation to buy or sell any specific security. To learn more about our firm and investment approach, check out our Form ADV.
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