Tactical Shifts: Energy, Geopolitics, and the Return of Value
Protecting downside risk and seizing opportunities aren’t mutually exclusive; they are the foundation of our performance. In late 2024, as artificial intelligence drove U.S. large-cap tech to historically elevated valuations, we prioritized risk management over chasing a top-heavy market.
By early 2025, we began trimming our U.S. equity exposure, deliberately reallocating into gold and short-duration treasuries. Against a backdrop of rising geopolitical friction and shifting trade policies, these assets provided a vital hedge. As tech valuations stretched further beyond our intrinsic value models later in the year, we executed a secondary reduction, channeling those proceeds into broader commodities like silver and gold mining companies.
Ultimately, this disciplined approach to risk and value has been the core driver of our recent performance.
The January 2026 Strategic Shift
In January 2026, our portfolios reached a transition point. Driven by continued concentration concerns and unsustainable valuations in the software tech sector, we decisively cycled out of our remaining large-cap technology exposure.
Rather than sitting on cash, we deployed this capital into a sector our investment committee had previously targeted for an overweight allocation: Energy. Once our macroeconomic indicators aligned early in the year, we initiated the rotation.
To capture value across both traditional and transitional markets, we constructed a diversified energy allocation rather than relying on a single broad index. This strategic mix included:
- Oil Services: Capitalizing on the specialized equipment and infrastructure required to maintain global drilling operations.
- Traditional Energy: Focusing on established producers to provide a strong foundation of cash flow and dividend yield.
- Renewable Energy (Nuclear Focus): Viewing uranium as a critical component of the global energy transition. As infrastructure demands soar, the reliable baseload power provided by nuclear reactors is becoming increasingly indispensable.
Q2 2026 Update: Navigating Geopolitics and Energy Markets
Our pivot to energy was quickly tested. In late February, joint military operations by the United States and the IDF in Iran introduced significant systemic risk to the global markets. The subsequent attempted blockade of the Strait of Hormuz severely disrupted global oil transit, creating infrastructure constraints that drove a sharp premium in oil, with Brent Crude rising over 75% year-to-date.
While this current spike is heavily tied to a geopolitical premium, our outlook for the energy sector remains highly positive, even in a post-conflict environment. Structural energy demand driven by technological infrastructure, recent legislation prioritizing energy independence, and years of historical underinvestment will continue to support the sector’s outperformance.
2026 Outlook: The Return of Value
We maintain a constructive outlook on hard assets, favoring companies with strong balance sheets, robust cash flows, and attractive valuations.
This disciplined approach is increasingly pointing our research abroad. We see compelling opportunities in Europe, driven by increased defense spending, historically compressed valuations, and a supportive macroeconomic environment. Emerging markets present another avenue to diversify away from concentrated U.S. exposure, offering the benefit of lower multiples and accommodative monetary policies; though we are carefully monitoring short-term geopolitical headwinds, particularly regarding China.
A changing market requires a dynamic strategy. We remain dedicated to finding value, managing risk, and keeping our clients a step ahead. If you’d like to learn more about our 2026 outlook or explore how Acorn’s tactical asset allocation can work for your portfolio, contact us today to schedule a consultation with our team.
