Client Newsletter 3Q26
Dear Ambassador Family,
In this quarter’s newsletter, we share brief perspectives on three areas that can influence your financial well-being: current market trends, the role emotions play in financial decision-making, and common financial and tax planning mistakes to avoid.
A few year-end planning windows close sooner than expected:
October 1: Establish a new corporate retirement plan for 2026 contributions.
November 10: Submit Roth conversion paperwork.
November 10: Submit Qualified Charitable Distribution (QCD) paperwork.
Early action gives us more time to review options and complete paperwork before year-end.
Investment Update: “When the Crowd Zigs, Zag” in 2026
One subsector within one industry—semiconductors—has driven nearly all the market’s gains during the first half of 2026.
Semiconductor stocks have risen nearly 80% in six months. We have also seen similar performance in several major North Asian markets, including Korea, Taiwan, and Japan.
Your portfolios include some exposure to semiconductors and other themes related to artificial intelligence infrastructure. However, that exposure remains well below the semiconductor industry’s approximately 18% weight in the S&P 500.
As a result, your portfolios have not experienced as much “giddy up” as these high-flying stocks. In fact, one of the mutual funds in your portfolio—an equity long-short strategy—seeks to benefit from potential weakness in some of these highly valued companies.
We are comfortable with that. Why?
- Semiconductors represent a historically large share of the market.
Semiconductor stocks now account for a greater share of the market than they did at the peak of the dot-com bubble in 2000. This level of concentration deserves caution.
- Debt-financed buying has helped fuel these stocks.
Easy credit can allow buyers to push prices beyond sustainable levels, much like the housing market before its decline. If access to credit tightens,
demand for today’s high-flying AI stocks could fall quickly.
- The stocks of their largest customers have declined.
The stocks of major technology companies known as hyperscalers have declined as investors question whether their significant AI investments will produce adequate returns. If spending slows, semiconductor suppliers could face lower demand, prices, or profits.
- New competition could place profits at risk.
Existing manufacturers are adding capacity, major customers are developing their own chips, and China continues to expand lower-cost production and chipmaking capabilities. Even modest pressure on demand or margins could threaten today’s elevated valuations.
- Companies are reconsidering unlimited AI spending.
Demand for AI products continues to grow, but companies are becoming more cautious about costly capital investments and their potential returns.
- Infrastructure constraints could slow future growth.
AI expansion requires substantial power and data center infrastructure. However, rising contract cancellations, limited power availability, and political opposition to new data center construction could delay or reduce future development.
These bottlenecks may make it harder for companies to expand at the pace investors currently expect. If infrastructure growth slows, demand for chips and other AI-related equipment could also fall short of today’s optimistic projections.
Good financial planning often depends as much on avoiding common mistakes as it does on finding new opportunities.
- Waiting until tax season to plan. Filing reports what already happened; planning helps shape decisions before year-end.
- Chasing returns without considering risk. Higher returns are not worthwhile if the risk does not fit your goals or could erase prior gains.
- Ignoring the tax impact of investment decisions. Selling, rebalancing, or generating income can create tax consequences that should be considered in advance.
- Completing Roth conversions without a full projection. Roth conversions can be valuable, but poor timing may increase taxes or create other unintended costs.
- Overlooking Medicare premium impacts. Higher taxable income can increase future Medicare premiums, so tax decisions should account for these thresholds.
Thoughtful planning looks beyond one transaction. Each decision should support your broader financial plan, tax strategy, and long-term goals.
Managing Emotions Is Crucial to Your Financial Success
Emotions play an important role in our lives, but they can lead us astray when making financial decisions. Left unchecked, certain reactions can hurt families and their long-term plans.
Recency Bias
Recency bias occurs when we place too much weight on recent events and overlook the broader past and future.
During strong markets, investors may think, “Why not go all-in on stocks?” During declines, they may want to leave the market altogether. Decisions based mainly on recent performance can become impulsive and ignore the lessons of financial history.
The Comparison Trap
“How come I am not making what they are making?”
Some investors become concerned not because their plan is failing, but because a friend, neighbor, or co-worker claims to be earning higher returns. People often share their wins but rarely disclose their losses—or explain that a successful high-risk investment represents only a small part of their portfolio.
Selection Bias
“One of my stocks is doing so well. Why isn’t my whole portfolio performing like this?”
Selection bias causes us to focus on top-performing investments while overlooking underperformers. This can distort expectations and lead to poor decisions. Even today’s strongest stocks may not continue rising in the future.
Successful clients approach their financial lives with confidence discipline. They do not let cocktail-party stories, social media hype, or exaggerated market commentary drive their decisions. Instead, they:
- Measure progress against their own goals. They consider their stage of life, risk tolerance, and long-term needs rather than comparing themselves with someone else’s story.
- Follow a disciplined plan. They do not chase the latest hot investment. Risk, time horizon, and current liquidity needs are important considerations when planning for both near and long-term goals.
- Expect market sentiment to change. Today’s market may be driven by greed and FOMO; tomorrow’s may be driven by fear. Disciplined investors do not allow either extreme to control their decisions.
Several other planning oversights can create unnecessary costs, confusion, or complications over time.
- Assuming estate planning is only for the wealthy. A sound estate plan provides control, clarity, family protection, and fewer complications.
- Forgetting to update beneficiary designations. Retirement accounts, life insurance, and transfer-on-death accounts often pass outside a will or trust.
- Making financial decisions in isolation. Investment, tax, retirement, estate, insurance, and business planning should work together.
- Letting taxes drive every decision. Tax savings matter, but the lowest-tax option is not always the best financial choice.
- Failing to review last year’s tax return. Your return may reveal planning opportunities, avoidable issues, or potential future tax savings.
Successful plans coordinate these areas rather than treating them separately. A regular review can help identify opportunities early and reduce surprises later.
Sincerely,
Petr Burunov, CFP®
President / Wealth Strategist