Published May 5, 2026

At a Glance

• Disruption — tariffs, geopolitical shocks, pandemics — is a recurring feature of markets, not a new condition.
• Markets have historically absorbed shocks and recovered, but "long term" can mean a decade-plus (NASDAQ took 15 years to reclaim its dot-com peak).
• A diversified, properly allocated portfolio is built to weather these moments without reactive trading.

If it feels like the headlines have been relentless lately, that's because they have been. Over the past year, investors have had to process an ongoing trade war, sharp market swings and now the geopolitical shock of a war in Iran—all while trying to stay focused on their long-term financial goals. As we discussed in our Q1 2026 quarterly letter, economic news in the first quarter was dominated by the conflict in the Middle East and its effects on markets.

These are the kinds of disruptive forces that test our patience as investors. And while the current backdrop may feel uniquely unsettling, it's worth stepping back and asking: how does this moment compare to other periods of disruption? And more importantly, how should you respond?

Disruption itself is not new. It could come from government policy like tariffs, from geopolitical crises, from unexpected shocks like the Covid pandemic, or even from something as improbable as one of the world's biggest container ships blocking the Suez Canal for a week. History can give us a clue as to how events like these have shaken out—though, as the SEC likes to remind us, past performance is not indicative of future results. There's no way to know what will happen six days, six months or even six years after a disruptive event takes place.

What History Can Teach Us

Let's start with tariffs, since they've been a persistent feature of the economic landscape since early 2025. When the Trump Administration announced sweeping tariffs on Canada, Mexico and China—with rates ranging from 20% to 25% and climbing higher in subsequent rounds—markets reacted sharply. A series of stutter steps followed as the Administration alternately paused tariffs on some goods while increasing them on others.

History offers useful context. The Smoot-Hawley Tariff Act of 1930 is the most cautionary example: enacted during the Great Depression, it triggered retaliatory tariffs from Canada and European countries, contributed to a collapse in global trade and deepened the economic downturn. The first Trump Administration's 2018 tariffs told a different story—they didn't spark the same cascade, though they also didn't achieve their stated goal of reducing the trade deficit with Mexico, which actually increased by 159%.

As for the 2025 tariff round—we now have the benefit of hindsight. Markets absorbed the initial shock, experienced significant volatility and, true to form, began recovering as investors recalibrated. This is consistent with what more than a century of market history has shown: disruptions are painful in the short term, but markets have generally found their footing.

That said, it's worth being honest about what "long term" really means. The NASDAQ didn't reclaim its dot-com-era peak until 2015—15 years after the bubble burst. The S&P 500 delivered a negative annualized return for the entire decade from 2000 to 2009, underperforming both bonds and cash over that stretch. The long-term direction of markets has been upward—but the path can be grueling, and it can test even the most patient investors. This is precisely why a properly diversified portfolio matters as much as it does.

The same perspective applies to the Iran conflict that has dominated headlines in 2026. As we explored in When Geopolitics Rattle the Markets, geopolitical crises are unsettling by nature and their market effects can be sharp in the short term. But looking back at major geopolitical events over the past century—World War II, the Korean War, the Gulf Wars, the September 11 attacks—markets have ultimately found their footing, even when the recovery took longer than anyone expected.

Your Next Steps

None of this is to say that disruptions won't touch your daily life—they may. Rising prices from tariffs, energy market volatility from geopolitical conflict, uncertainty about future policy—these are real concerns that may warrant a closer look at your budget and spending, particularly if you're on a fixed income.

When it comes to your investment portfolio, though, remember that it's been designed with disruption in mind. Research shows that diversified portfolios—those that combine stocks, bonds and other asset classes—have historically experienced significantly less pain during downturns than all-equity portfolios, and have recovered more quickly as a result. Proper diversification and disciplined rebalancing are built to help you navigate uncertainty without having to make reactive decisions in the heat of the moment.

We've worked together to create an investment plan that's structured for tax efficiency and allocates your assets according to your need, willingness and ability to take on risk. If your goals or circumstances have changed, we can revisit your allocations. But if nothing fundamental has shifted, you may not need to make any changes to your strategy at all.

The noise can feel deafening right now. That's normal—and expected. Disruptions are, by nature, jarring. So if you have questions about what's happening in the markets, the economy or your own portfolio, please reach out. That's exactly what we're here for.

It has been nearly three years since the arrival of OpenAI’s ChatGPT-3.5, marking generative AI’s watershed moment. Suddenly, algorithms could produce text, computer code and images comparable to human output—and an AI investment boom was underway. Fast-forward to today, when the investment news is filled with comparisons to the dot-com bubble of the late 1990s and questions about whether the boom may soon turn to bust.

As in the late 1990s, a transformational technology has sparked enormous enthusiasm and aggressive capital expenditures (capex). For 2025, big tech spending clocks in at an estimated $400 billion. Building the infrastructure required to support this technology is expected to cost $3 trillion through 2028. Some worry that the technology ultimately will not provide enough value to justify the investment. OpenAI, for instance, is planning a $500 billion data center project, even though the company will generate only $13 billion in revenue in 2025.

Yet there are important differences between 2025 and 2000. Unlike the speculative companies of the dot-com era, today’s biggest public technology firms are highly profitable and funding capex out of substantial cash flows. And while valuations are elevated, they’re not at the extremes seen in 2000. The S&P 500 Information Technology Index recently traded around 30 times forward earnings, well below the dot-com era peak of 55.

Should You Worry About a Bubble?

Reasonable arguments exist on both sides of the bubble debate. But long-term investors don’t need to pick a side. Correctly identifying a bubble is extraordinarily difficult—and it’s unnecessary.

Your job is not to figure out whether a particular market is moving too far, too fast. It’s to invest in a way that gives you the best chance to reach your long-term goals. The key to that task is to build and maintain a portfolio that can keep you on track toward those objectives across many different market environments, including both booms and busts. That means diversifying across asset classes, sectors, company sizes and geographies.

Diversification to Balance Risk and Potential Reward

Many investors assume their stock holdings are well diversified if they track the S&P 500. However, the so-called “Magnificent Seven”—seven of the index’s largest technology companies—now account for roughly 35% of the index. Those same companies account for about 30% of all capex in the S&P 500, a large share of which is AI-related. In other words, mirroring the S&P 500 means you’re betting a significant chunk of your future on AI-driven growth. If the boom hits a speed bump, you might be over-exposed to the downside.

That doesn’t mean avoiding innovation or transformative technologies. It means being deliberate about how much of a portfolio’s future is tied to a single narrative. Diversification can help limit the risk of this type of concentration.

In practice, diversification is not about owning everything equally. It’s about continually assessing where capital is becoming crowded, where expectations are extreme, and where future returns may be more resilient. The dot-com bust offers a useful case study of the ways small-cap and international equity allocations can help reduce the impact when large growth stocks decline.

The dot-com bubble burst in March 2000, sending large growth stocks into a freefall. Over the five years through March 2005, the Russell Top 200—the market’s 200 largest stocks by market capitalization—lost more than 25%.[1] Meanwhile, the Russell 2000 index of small caps did almost exactly the opposite, gaining about 23%[2] over the same time period. International stocks also outperformed, beating U.S. stocks between 2000 and the 2008 financial crisis. The upshot: Investors with diversified portfolios had a very different, less turbulent experience than investors who concentrated on the stocks that dominated the indexes at the end of the 1990s. Spreading their investments around may have supported their account balances during the first half of the 2000s, possibly leaving them with more assets to benefit from subsequent gains.

Long-Term Investors Don’t Need to Predict Bubbles to Manage Risk Intelligently

We’re not predicting that history will repeat itself. No one knows what the future holds. The point is that market leadership can change, sometimes abruptly, and a diversified portfolio is designed to adapt to those changes. With a diversified portfolio that’s built around your goals, you don’t have to predict when or why such shifts will occur.

Bubbles are clear only in hindsight. Diversification, on the other hand, works in real time. And it remains one of the most effective tools you have to navigate uncertainty. As the new year begins, periods like this are often a useful time to revisit portfolio structure, concentration, and assumptions—not to make bold bets, but to ensure your capital is positioned thoughtfully for whatever comes next.

[1] Cumulative return calculated from -5.73% annualized return for the five years through March 2005.

[2] Cumulative return calculated from 4.30% annualized return for the five years through March 2005.