March 9, 2026 Letter to Clients

As we have entered another new year, we have been reflecting on an important question: What are we really optimizing for? For decades, our industry has defined success by one primary metric- more. More returns, more efficiency, more tax savings, more growth. We’re trained to fine-tune portfolios, manage risk, reduce tax drag, and pursue higher performance. These tools are valuable and essential. But should wealth management begin and end with maximizing returns? We don’t think so.  

We believe the goal shouldn’t just be building wealth, it should be using wealth to build a better life. That means aligning financial decisions with what truly matters to you: peace of mind, flexibility, health, family, purpose, and fulfillment. Sometimes the mathematically “optimal” answer isn’t the life-enhancing one. Paying off a low-interest mortgage may not always produce the highest return, but it might provide peace of mind, relief and a sense of accomplishment that a home is paid off. Moving to a higher-tax state may not maximize net income, but it might dramatically improve happiness and well-being. 

Just as good health is about more than lab results, financial success is about more than portfolio performance. The real measure of success is whether your wealth supports the life you want to live by reducing stress, expanding choices, and enabling what brings meaning to you. Our role remains fiduciary at its core: to help you understand trade-offs clearly and make informed, educated decisions. And when a choice prioritizes well-being over incremental return, supporting that decision can be fully aligned with acting in your best interest. 

As we look ahead, our focus is not on predicting markets or speculating what will or will not happen because of events that may or may not happen. It’s on deepening conversations about what your money is for. Markets will rise and fall. What we can control is how intentionally we connect your financial strategy to your personal values. Because ultimately, if your wealth isn’t helping you live well, then simply having more of it isn’t the goal. 

That said, we are fortunate to serve a wide range of clients with varied lifestyles and varied financial resources. In this letter we will dive into the term “K-shaped economy” and recognize that this economy impacts many of our clients differently. For those who the opening statement of this letter resonates with, we encourage you to have conversation with us, so we make certain our investment decisions are aligned with your goals and values. For those who are currently more focused on managing the day-to-day cost of living, perhaps either trying to save for a first home, navigating high-interest debt, juggling to save more while also saving for retirement, please reach out for conversation. Many folks, as you’ll read below, are facing similar concerns and talking with an experienced financial professional can be beneficial.  

Conflict in the Middle East 

Just as we put the finishing touches on this first letter of the year and we were ready to hit print, the current events in the Middle East unfolded, prompting us to pause and gain insight into what is occurring to offer our insights. As we are all aware, the updates surrounding this conflict continuously come as the events unfold, therefore we are diligently monitoring these updates to act accordingly. At the present time we will share that we expect the markets to experience elevated volatility over the coming weeks as the scope and duration of the conflict become clearer. U.S. equity markets had already shown signs of unease this year, including a rotation away from AI-related companies toward more tangible sectors such as industrials, energy, and materials, alongside growing concerns about potential risks within credit markets. The most direct impact of the recent attack is oil, with Iran having closed off the Strait of Hormuz, having warned any vessel attempting transit through the waterway will be targeted. Approximately a fifth of the world’s oil travels through the Strait of Hormuz. The closure has caused a significant spike in oil prices and analysts warn a prolonged blockage of the waterway could push prices significantly higher. Other sectors facing notable disruptions from the conflict are airlines, energy and e-commerce, with thousands of flight cancellations, soaring fuel costs and Amazon having reported drone attacks on its data center.  

Periods of geopolitical conflict can be unsettling, and heightened headlines often lead to short-term market volatility. A review of past U.S. military actions in the Middle East show that markets may react in the near term but have historically stabilized as investors refocus on economic fundamentals. Geopolitical developments are unpredictable and fast-moving, yet long-term investment plans and asset allocation strategies are often built using decades of market data that already incorporate world wars, regional conflicts, political crises, and other periods of significant uncertainty. These frameworks are designed with the expectation that geopolitical disruptions are inevitable. Periods like this also highlight the difficulty of making investment decisions based on geopolitical headlines. Market reactions often occur quickly and unpredictably, and markets frequently begin to recover before geopolitical outcomes become clear. As a result, attempts to time market movements around evolving events have historically proven extremely challenging. Maintaining a disciplined investment process grounded in diversification, risk management, and investment objectives remains the more reliable approach. While the current environment may feel uncomfortable, history suggests the most prudent course for long-term investors is to remain invested, stay diversified, and stay focused on their investment objectives. We invite you to contact our office should you wish to discuss this in more detail, express any concerns you may have, or to make us aware of any upcoming financial expenses you anticipate using your portfolio to draw from so we may plan accordingly.  

The K-Shaped Economy: Why Growth Feels Uneven 

You may have heard economists use the term “K-shaped economy” to describe today’s environment. In simple terms, it means different groups of people are experiencing very different financial realities at the same time. One group is moving upward, benefiting from rising investments, strong home values, and growing business profits. Another group is moving downward or struggling to keep up, facing higher living costs, more debt, and slower income growth. The overall economy may be expanding, but the benefits are not evenly shared. 

This pattern first gained attention during the COVID-19 pandemic. At that time, higher-income workers were more likely to keep their jobs, work remotely, and benefit from rising stock and housing markets. Lower-wage workers were more exposed to layoffs, business closures, and inflation pressures. Government stimulus programs temporarily narrowed the income gap by providing direct payments, enhanced unemployment benefits, and tax credits. But once those programs ended and markets surged, inequality resumed its longer-term upward trend. 

Today, income inequality stands at levels not seen in roughly 60 years. The share of Americans considered middle class has steadily declined over the past several decades, while both lower-income and higher-income groups have grown. Rising interest rates and persistent inflation have added pressure, particularly for households with fewer financial resources. In contrast, families who own homes, stocks, or businesses have generally benefited from strong asset appreciation. 

Some level of inequality is natural in a market-driven economy that rewards investment and innovation. However, when the gap becomes too wide, it can create economic strain. Higher-income households tend to save more of their earnings, while lower-income households spend a larger share of their income simply to cover everyday expenses. If too much income is concentrated at the top, overall consumer demand can weaken over time. Currently, overall spending remains steady, but the sources of that spending are shifting. Higher-income households are continuing to spend at healthy levels. Meanwhile, many lower-income consumers are relying more heavily on credit cards and auto loans. Rising delinquency rates in these categories suggest financial stress is building in certain segments. If borrowing becomes unsustainable, it could slow broader economic growth. History shows that periods of excessive income concentration can increase economic volatility. When more households rely on debt to participate in the economy, growth cycles can become less stable. While forecasts still point to continued expansion, risks such as slower growth combined with higher prices remain, especially for families already under financial pressure. 

The K-shaped pattern doesn’t just affect households; it influences business performance as well. Companies that serve wealthier customers often report stronger demand and more stable revenue. Businesses focused on lower- and middle-income consumers, particularly those selling discretionary goods and services, may face slower growth and more cautious spending behavior. Geography also plays a role. Businesses operating in higher-income areas are generally seeing healthier consumer activity, while those in lower-income regions are experiencing softer demand and more negative sentiment. This creates challenges for retailers, hospitality providers, and service-based businesses that depend on broad, middle-market spending. 

One of the biggest questions for the future is how technology, particularly artificial intelligence (AI), will shape the next phase of economic growth. AI is already improving productivity in capital-intensive industries and rewarding workers with specialized technical skills. Businesses that successfully adopt AI tools may gain efficiency and profitability advantages. However, if access to AI remains concentrated among larger corporations and highly skilled professionals, the income gap could widen further. Technological change has historically displaced certain types of jobs while creating new opportunities. Today, AI is affecting not only routine administrative work but also roles in customer service, software development, and other knowledge-based professions. 

Addressing a K-shaped economy requires long-term thinking because the K-shape reflects a reality many Americans recognize: growth is happening, but not everyone is moving forward. While the broader economic outlook remains positive, the long-term health of the economy depends on broad participation. Sustainable growth requires not only strong markets and corporate profits, but also financial stability and opportunity across varied income levels. The goal is not simply expansion, but expansion that more Americans can share in and benefit from. 

The “Wealth Effect”: Turning Three Years of Gains into Strategic Opportunities  

After three consecutive years of strong market returns, many investors find themselves in an unusual position. Portfolio gains feel reassuring, and rising account balances can make spending decisions easier, something economists refer to as the “wealth effect.” Yet despite this momentum, the current environment is marked by a striking disconnect: persistent political and economic uncertainty on one hand, and resilient, steadily climbing markets on the other. 

This gap between continuous troubling headlines and rising stock prices can create a sense that markets “should” be reacting, and because they (mostly) aren’t it can leave investors waiting for the other shoe to drop. That tension often leads to paralysis, which is rarely productive. Historically, political noise tends to have limited long-term market impact. While short-term volatility can occur, markets are ultimately driven by earnings, economic growth, and capital flows. And right now, earnings are broadening beyond just a handful of mega-cap technology names. 

In fact, some of the more compelling developments are happening quietly beneath the surface. International stocks have continued to show strength, supported by more attractive valuations and improving earnings trends abroad. At the same time, small-cap and value stocks have begun to outperform their large-cap growth counterparts, a shift that often occurs in the earlier stages of economic recovery. Importantly, this suggests improving market breadth, meaning opportunities may be expanding beyond the dominant tech leaders of the past several years. 

So, what does this mean for portfolio management? Discipline remains key. After an extended period of strong gains, this is likely the appropriate time to rebalance portfolios, trim concentrated positions, make certain portfolios reflect market opportunity and thoughtfully diversify, always with an eye toward tax efficiency. This is accomplished while keeping in mind your stated goals and timeframe for use of funds, as well as a sound understanding of your willingness for risk. For our senior, financially well-established clients this is a good time to have thoughtful conversation so we may evaluate your portfolio’s risk levels and make any necessary adjustments.  

Bottom line, markets rarely move in ways that feel perfectly aligned with the headlines. Rather than reacting to noise, our focus remains on maintaining diversification, managing risk, and positioning portfolios for durable growth. As always, we are here to help you navigate both the opportunities and the uncertainty with clarity and intention. 

Warm Regards, 

Steve LePage                 Colleen Bianco