Client Update, May 2026: Let's speak plainly.

“A smooth sea never made a skilled sailor.”

President Franklin D. Roosevelt in a 1938 radio broadcast

This month, we want to take a step back from our usual analysis and speak a little more plainly and openly about the world we’re all operating in right now.

The constant stream of economic and geopolitical uncertainty is exhausting, and the combination of economic volatility and rising costs are steadily eroding both quality of life and the opportunities available to people. If we were to walk through the average household today to see what’s keeping people up at night, the list is long and growing:

• Job security feels more fragile, and paychecks don’t stretch as far as they used to. Costs are rising everywhere, from filling up a gas tank (averaging $4.50 per gallon as of this writing) to going to the grocery store.

• Healthcare remains a persistent source of anxiety, where even those with insurance can find themselves facing financial strain after a serious illness, and those without may have no options but to forgo care or hope a GoFundMe campaign will pay out.

• People with established careers are facing the prospect of their jobs becoming obsolete due to changes in everything from AI to global supply chains.

• Education costs have climbed steadily, yet the path from degree to stable employment feels more uncertain than ever. The unemployment rate for recent college grads is over 35% higher than the unemployment rate overall and almost double the rate for all college grads.

To generalize, there’s a real sense that many people, despite doing all the “right things” like getting a good education, working hard, and saving money, are still falling behind.

But perhaps the real frustration here is that, while we would not expect the government to race in and solve all these problems for us, neither would we expect it to contribute to them either.

For example, given that we have several kids in college, we have first-hand experience with a system where parents and their children finance a significant amount of money to become educated, hirable assets in the workforce only to face a deeply uncertain job market on the other side.

What is the government doing to address these issues? How is it bringing healthcare costs under control while preserving access? How is it strengthening the relationship between education and employment so people can invest in their future with greater confidence that it will pay off?

More importantly, how is it supporting the kind of broad-based business growth and hiring that creates opportunity for younger generations and everyone else?

Immediately after the 2024 presidential election, we wrote (optimistically) that a more stable tax and regulatory environment could better support American businesses and long-term capital allocation decisions. We had hoped that might be the economic environment a newly elected Republican president would favor.

Unfortunately, that opportunity appears to have been squandered.

Certainly, the Trump Administration has moved away from the Biden approach to regulation and taxation. Yet it too has failed to create the kind of sensible, business-supportive environment many of us had hoped for. Instead, its relentless focus on chaotic and ill-considered tariff schemes, its rejection of global partnerships, and its nonstop parade of inflationary activities have yielded a fiscal environment layered with risk.

Admittedly, some of these layers of risk predate Trump. But it doesn’t change the fact that, rather than having a public sector consistently working alongside the private sector, businesses have frequently found themselves working at cross-purposes with the government itself. That hurts both businesses and, ultimately, consumers as hiring prospects and disposable income dwindle.

As a result, it sometimes feels like the government is not merely failing to solve these problems but actively planting economic landmines.

To reiterate, it’s not that we should expect the government to nanny citizens or businesses out of every personal challenge. But it is fair and right to ask whether policy decisions are helping or hurting.

For decades, American businesses have built their supply chains, capital plans, and hiring strategies around a relatively stable set of assumptions regarding trade and economic cooperation. Whether one agreed with that system is beside the point. Healthy democracies have always debated everything from taxation to industrial policy. Businesses can operate within those debates, as long as policy remains coherent enough to plan around. Companies can adapt to almost any framework if the rules are predictable and grounded in long-term objectives.

What companies are now confronting feels fundamentally different.

Policy direction has become increasingly personalized, reactive, and subject to abrupt change. Tariffs no longer function solely as a long-term economic tool. At times, they appear intertwined with political disputes, diplomatic grievances, and even simple day-to-day public encounters. After King Charles visited the U.S. in late April, for example, Trump announced that certain tariffs would be removed. But that’s not objective-oriented policy. Its tariffs shaped by the impulses and day-to-day whims of a single individual.

If you are managing a business with tens of thousands of employees, long production cycles, and globally integrated operations, this kind of environment is extraordinarily difficult to navigate.

You cannot rebuild a supply chain overnight when government policy leads to higher costs. You cannot commit billions in capital spending when the underlying policy framework may change dramatically based on a single press conference, social media post, or political disagreement.

Imagine being the CEO of a company and having to deal with the vaguely threatening statement from Trump saying “I’ll remember” companies that do or do not seek tariff refunds. On one hand, management has a fiduciary responsibility on behalf of shareholders to collect tariffs that were incorrectly paid based on the Supreme Court’s ruling striking down most of Trump’s early tariffs. Yet on the other hand, companies may fear finding themselves in conflict with an executive branch that could actively work against them.

At the same time, the Trump Administration has increasingly turned into what The Wall Street Journal described as an “Activist Investor,” as it takes direct stakes in a growing list of companies.

On top of this, many businesses are simultaneously trying to absorb additional geopolitical strains, such as adjusting supply chains in response to events like the extended closure of a vital international shipping lane in the Strait of Hormuz.

The ultimate outcome here is that corporate decision-making slows or freezes for fear of decisions being upended or punished. In turn, hiring and investment slow, as companies become more focused on managing policy volatility than pursuing growth.

The tone of this letter might read as a little pessimistic compared to market performance, which has remained surprisingly resilient even in the face of energy supply shocks and other headwinds. Far from showing strain, the S&P500 has appreciated by more than 7% just since the start of the conflict with Iran.

Our view is that the markets are forward-looking. There is always at least a little disconnect between markets and present reality because investors are constantly pricing in future expectations. If the market believes some of the most disruptive policies or supply shocks will ultimately face legal, political, or economic correction, investors will not wait to incorporate those expectations into prices. Furthermore, market gains have been far from broad-based. Returns have exclusively accrued to a few sub-sectors within Information Technology. The flip side is that many bellwether companies in Real Estate, Housing, Consumer Discretionary, Industrials and Materials are struggling under the weight of Trump’s economic policies. Specifically, Home Depot, Nike, Zoetis, Danaher, Best Buy, Lennar, NVR, Whirlpool, Pentair, Otis Worldwide and many more companies are at multi-year lows as inflation and higher interest rates gets fully absorbed by the “real” economy.

The point is that nothing we’ve discussed here means the current situation is forever or that long-term optimism is unwarranted. Innovation continues apace, businesses are adapting to changing circumstances in real-time, and markets have continued to generate value for investors. To the extent economic policies fail to produce desired results, market and electoral forces will (eventually) combine to force change.

In next month's letter, I will further explain why I am avoiding frothier market areas and doubling down on high-quality companies trading well below historical averages. This positioning is designed to deliver outsized returns when market conditions shift from momentum back to value, similar to the late 1990s unwinding of the technology bubble.

A Note on the World of EVs

Moving away from our bigger picture commentary and drilling down into a more niche area of interest, a recent series of headlines in the world of electric vehicles caught our attention this past month. It appears that U.S. auto manufacturers like GM (NYQ: GM) and Ford (NYQ: F) are pivoting back toward gasoline and hybrid vehicles, away from electric vehicles.

We view this as a natural and at least somewhat predictable result of long-running companies facing something of an identity crisis. At the end of the day, it’s extraordinarily difficult to disrupt yourself from within. The incentives just aren’t there. What CEO wants to destabilize existing revenue streams in pursuit of a next-generation market that may take years to fully mature?

This challenge becomes even more difficult in an era increasingly dominated by short-term performance pressures. Many executives are operating under enormous pressure to produce immediate financial results, even when doing so may come at the expense of long-term positioning. This is especially true among a class of business leaders we’ve come to think of as “renter CEOs,” or CEOs who expect to be with a firm for only a few years.

That significantly narrows the horizon for generating positive returns.

The problem for legacy automakers is that everything from supply chains to manufacturing processes to corporate culture has been built around internal combustion engines. A genuine shift to EVs means not just incremental change but wholesale reinvention. It requires becoming a fundamentally different type of company, including a much more software-centric one.

That is part of what makes companies like Rivian (NSQ: RIVN) so interesting to us. They appear to be building with a much longer-term orientation and seem willing to make decisions that prioritize strategic positioning over near-term optics, with a focus on cultivating a fanbase as much as a customer base.

We don’t mean to suggest the Big Three auto manufacturers are going to become irrelevant or disappear. They have tremendous advantages available to them that make them highly durable. But at the end of the day, the transition to EVs is simply unlikely to be led organically by any of the Big Three.

On Glenn’s Desk

• For some insight into how Rivian is approaching its AI and autonomous driving capabilities, especially as compared to Tesla (NSQ: TSLA), RJ Scaringe recently shared his thoughts with futurist and tech enthusiast Kim Java on YouTube.

• Along the same lines, Rivian has spun off a couple of new venture-backed entities, Also Inc. and Mind Robotics. For a deeper dive into these spin-offs and how Rivian is investing in them, read “Rivian’s Hidden Venture Portfolio.”

• Podcast Invest Like the Best interviews billionaire trader Paul Tudor Jones. Their conversation is as fascinating as it is wide-ranging, but we especially appreciated his comments on Warren Buffett, riding trends as investors, and AI and bubbles. Watch it here.

• Finally, we thought the Q1 2026 shareholder letter from Marcus Lemonis, Executive Chairman and CEO of Bed Bath & Beyond (NYQ: BBBY), made for an interesting read. BBBY has had a tumultuous few years, to put it mildly. But Lemonis seems to have adopted a thoughtful, long-term strategy for, as he says, fundamentally rebuilding the company. We’ll be keeping an eye on this. Read the letter here.

Closing Thoughts

The reason we decided to speak so plainly about current events in this letter is that we see many households and businesses operating under real strain right now, and pretending otherwise does not help anyone. In fact, good financial stewardship matters more in difficult periods than easy ones. We recognize that our clients are entrusting us with their futures: with college funds, retirements, and their family security.

That awareness informs how seriously we approach our work every day. Our responsibility in environments like this is not to chase headlines or react emotionally to every policy shift, either pessimistically or optimistically. It is to remain alert, disciplined, patient, and focused on identifying businesses capable of enduring uncertainty while continuing to create long-term value.

As always, we appreciate your trust and the opportunity to navigate this environment on your behalf.

With warm regards,

Glenn