Q1 2026 Economic Letter

Spring has finally arrived along the Boise River; the sagebrush and wildflowers mark the changing of the season. As the days grow longer and the foothills turn green, it's a good time to pause, take a breath, and reflect on the quarter behind us and the opportunities ahead.

Market Commentary

Please find the quarterly market review attached. At the start of the year many expected to see a steady market increase as geopolitical tensions were likely to settle down. I would not describe the tensions over Greenland in January, a partial government shutdown in February, the conflict with Iran in March, and a tariff environment that is shifting dramatically from month to month as settling down. While many broad market indices were modestly negative for the quarter, some of our diversified portfolios that included international, emerging market, and commodities exposures appeared more resilient.

Changes in Allocations

At the end of the quarter, we rebalanced the portfolios. During the quarterly rebalance, the primary allocation changes occurred in the following model portfolios:

DFA Portfolios — We harvested profits from Emerging Markets, Gold, International Stocks and purchased Core U.S. Equity, Short Duration Bonds, and Bitcoin.

Core Portfolios — We harvested profits from Small/Mid Cap, Gold, Core and High-Income Bonds and purchased Worldwide Large Cap Equities and Bitcoin.

Values-Based Portfolios — We harvested profits from Balanced Income, Gold, and Emerging Markets and purchased Worldwide Large Cap Equities and Bitcoin.

Market Trends

AI

There is a great deal of discussion right now around unemployment, particularly as it relates to Artificial Intelligence (AI). The concern is that work is finite — that if a machine takes a job, there will simply be fewer jobs left for people. This fear is nothing new. Throughout history, machines have been created to replace human labor in various ways. Think about the power loom, the cotton gin, the mechanical reaper, the steam engine, the telegraph, the auto assembly line, the personal computer, and the internet. In each case, humans were not replaced — they became more productive. Accepting the idea that AI is somehow different, and will eliminate a large portion of the workforce, requires believing that demand for human goods and services is fixed and finite.

Historically, advances in technology drive productivity higher. This lowers the cost of production, reduces prices for consumers, and ultimately improves profits for the companies delivering those goods and services. The result is that real aggregate income tends to rise, which in turn generates more demand — both for existing goods and services and for entirely new ones that didn't exist before.

Yes, some jobs and even entire companies will disappear. But most will simply evolve. Some of you may remember using a Thomas Guide to navigate while traveling — before GPS, paper maps were the only option. In college, my roommate was a graphic designer. The internet was just beginning to make its way into his industry, producing images faster than anyone could have imagined. I honestly thought his career was in trouble. Instead, he went to work for a mapping company, applying his skills to create digital maps and guides. In 1999, Rand McNally finalized its purchase of Thomas Bros. Maps, and today Rand McNally's core business is GPS mapping and fleet tracking technology.

Perhaps the clearest illustration of technology's impact on productivity and income comes from the U.S. Bureau of Labor Statistics (BLS). In 1901, the average American household spent 42.5% of its income on food. By 2002, that figure had dropped to just 13.1%. That freed up nearly 30 cents of every dollar to be spent on things that simply didn't exist before — refrigerators, automobiles, televisions, air conditioning, health care, education, travel, smartphones, streaming services, and yes, investing. The workers who left farms as agricultural technology advanced moved into factories, offices, and the service and information sectors. The economy didn't run out of work — it created entirely new kinds of it.

Tariffs

As of the date of this letter, tariffs remain a source of uncertainty heading into Q2. The Supreme Court struck down the original IEEPA tariffs in February, but a 15% replacement took effect immediately under separate authority and expires July 24th. Congress on whether to extend it — right before midterm elections. Meanwhile, U.S. Customs and Border Protection just opened a refund portal this week for roughly $166 billion owed back to companies that paid under the now-invalid tariffs, which could provide a modest economic lift as those funds are returned.

Volatility is part of the journey, and navigating it together is exactly what we are here for. Markets will always have their seasons of uncertainty, and this quarter was no exception. Through it all, our focus remains where it always has, on you. We will continue rebalancing, looking for opportunities to harvest gains and position your portfolio well for what lies ahead. Thank you for the trust you place in us. It is something we never take for granted.

For a more in-depth commentary, please refer to the attached document.