an entirely artificial market quip mimicking the Sage of Omaha created in less than a minute from a simple query to Claude AI
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EMPIRICALS
First quarter 2026 was active with two wars, continued disruptive changes to US trade policies and a new disruptive force brought on by Google, Claude AI, ChatGPT, Grok and Co-Pilot. That said, the US dollar is up slightly over 1%, the yield on the US Treasury ten-year note is at 4.35%, a 12-month CD yields close to 4%, the S&P 500 is down mid-single digits, a typical domestic balanced portfolio is down approximately 3%, precious metals are down from their January highs, crude oil is up over 80% and Bitcoin is down over 20%.
MARKET COMMENTARY
The gains enjoyed since the beginning of the year have been erased in the last three weeks due to concerns from the war with Iran. Prior to the war beginning on February 28th, Mr. Market was in the process of repricing due to anxiety over the impact of AI while concerns regarding Russia’s war with Ukraine and uncertainties over tariff policies have faded (for now). Needless to say, the market is still quite crowded at the top with only 10 companies representing 37% of the entire index.
Precious metals and cryptocurrency price weakness can most easily be explained by the recent jump in oil prices. Speculative money tends to chase return and what better way to trade a rising asset than to pull away from one that rewarded the speculator so well in the last twelve months.
Disruption from AI was made obvious with one San Francisco-based tech company announcing a 40% layoff claiming AI will increase productivity with its remaining team members. These are early days with the technology.
The spread between the two- and ten- year US Treasury note yields has compressed since the beginning of the year but overall, rates are relatively unchanged in 2026.
WHAT’S NEXT?
The war with Iran is proving to be far more challenging and the uncertainties surrounding war make folly of market prognosticating. But prognosticate we must…
The US and world economies will soon begin experiencing inflationary headwinds driven by the Iran war and the resulting surge in crude oil prices. The AI generated graphic below illustrates the closure of the Strait of Hormuz’s impact over time on US GDP, the Dollar and the yield on the US 10 Year Treasury.
“IN THE MIDST OF CHAOS THERE IS ALSO OPPORTUNITY”-SUN TZU
Additionally, disruption to international trade brought about by US tariff policies will continue to drive inflation, making companies that have durable businesses with strong pricing power more resilient.
The recent scare regarding the effects of artificial intelligence on software companies is most likely overstated. Companies which allocate capital wisely into the new technology should benefit. History has proven that companies which failed to see the forest for the trees were replaced by companies who capitalized on the disruption.
In addition to the disruption and atrocious effects war places upon humanity, one must consider its financial costs. With a ballooning federal deficit caused by the Iraq war, the Great Financial Crisis and the Covid epidemic it remains to be seen how the bond market will continue to absorb the national debt. Managing portfolio fixed income duration and precious metal allocation will prove key in the coming months and years.
With all this Chicken Little talk I still have faith in our free market’s delayed reliability and as one of my mentors used to tell me “Andy- the birds will chirp in the spring!”
Andy Killion – a real human, not AI