Tactical Situation Report
(Weekly Portfolio Intelligence)
Super Summary:
- We delayed our rebalance for 1 week due to uncertain market conditions
- US and Iran skirmish in the Red Sea via the Houthis
- Shipping from Middle East hurt by east-west pipeline closure. Expected to reopen within a week
- Inflation came in hotter and the Federal Reserve raised interest rates 0.25% with another expected in December
- Oil prices climbed over $100 per barrel that signals inflation and a tougher economy
- Our average account is up 22.8% so far this year, with Alpha Convergence up 31.18% against the S&P 500 at 11.70% and the equal weight version at 10.82%
Our results since last rebalance on June 23rd.
On The Move
Challenging week for markets and harder for us. The big news was delaying our rebalance for better economic clarity on some major issues. Although our information signals were calling for a new portfolio, conditions in the market are also very important. When we choose a portfolio, current market conditions are a part of the analysis and when those change significantly, it is wiser to delay for more answers than we had a week ago.
Chief among the issues is the path of interest rates that impact everything from tech companies to home mortgages and home buying. On Wednesday, Federal Reserve Chairman Kevin Warsh announced the members of the Fed Open Markets Committee all agreed to raise interest rates 0.25% now. Further, they now plan to raise rates again in December, and have erased a planned cut they penciled in for 2027 due to changing economic circumstances, including the continuing high price of oil.
Oil is also on the front burner anytime it passes $100 per barrel. It signals tougher going for our economy and could eventually grind us into a recession. Oil affects almost every economic sector and even our service industry is oil sensitive to some degree. For example, the more it costs for workers to commute, the less they have for other items and that drives how people spend and work. Higher oil prices slow economic activity.
Finally, AI spending and investment is the largest factor driving the US economy today and if it meaningfully slowed, so would the economy. While the debate on safety grows, we do not yet see the case for slower spending other than shortages in areas like memory chips.
What we can see is the following:
- Interest rates need to go up because unchecked inflation can get out of control quickly. If anything, 2022 demonstrated how quickly wage inflation can inject itself and that makes inflation stickier than the cost of goods going up;
- Oil prices will stay high through the end of the year and there is no timeline for opening the Strait of Hormuz, which affects other commodities like fertilizer and helium; and
- Slowing AI investment would slow everything else it has been powering, including everything newly minted AI millionaires have been buying.
Meanwhile, the market is shifting. The S&P 500 moved back ahead of the equal weight version, meaning the largest companies are accelerating again even as prices overall have declined.
What It Means for Us
We weathered a portfolio one week longer than we wanted, and it resulted in a better class from which to draft a new team. Although we didn’t make progress this week, we had enough of a lead that we could sacrifice some for what we expect to be a better new period.
From the bridge.
Disclaimer
This newsletter is provided for informational purposes only and represents the current opinions of Life UnLocked Partners ("LUL"). It should not be considered personalized investment advice or a recommendation to buy, sell, or hold any security or adopt any particular investment strategy. The information presented is based on sources believed to be reliable, but LUL makes no representation as to its accuracy or completeness.
Past performance is not indicative of future results. All investments involve risk, including the potential loss of principal. The investment strategies discussed may not be suitable for all investors. Each investor should review their investment objectives, risk tolerance, and financial situation with a qualified advisor before making any investment decisions.
Performance data presented reflects the specific LUL strategies described and may not reflect the performance of any individual client account, which will vary based on account-specific factors including timing of investments, additions or withdrawals, and individual restrictions.
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Benchmark Data: SPY and RSP Sharpe Ratios are sourced from PortfoliosLab (December 2025) and represent trailing 12-month calculations. Industry benchmarks for active managers and hedge funds are based on published academic research and industry surveys.
Past Performance: Past performance is not indicative of future results. All investments involve risk, including possible loss of principal. The Sharpe Ratio is one of many metrics and should not be used in isolation for investment decisions.
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