Last week’s volatility again placed modest pressure on Sowell’s technical moving averages, though it remains premature to signal a meaningful shift in the underlying fundamentals. Attention now turns to this week’s Federal Reserve narrative, which may influence the momentum of the technical trend. For now, Sowell’s gauges remain composed, looking through the near-term turbulence toward the broader economic signals.
“It's better to buy a Wonderful Company at a Fair Price than a Fair Company at a Wonderful Price”
— Warren Buffett, 1989 Berkshire Hathaway Shareholder Letter
The market last week was behaving a bit like a luxury sedan that just hit a massive, unmapped pothole. We started the year with the wind at our backs, but the recent "Iran curveball" has turned a Sunday drive into a test of suspension and driver discipline. Last week’s volatility serves as a stark reminder of Warren Buffett’s timeless wisdom: our focus should remain on the quality of the "machine" we are driving, not just the temporary fluctuations in the price of the fuel.
Market sentiment can turn faster than a sports car on a wet track. On January 31st, the S&P 500 was sitting pretty with a 1.45% YTD gain. Fast forward to March 13th, and the index is staring down at a -2.86% YTD return. That is a 4.31% swing in just two weeks, largely fueled by the Iran conflict and the vertical move in energy prices.
WTI Crude futures screamed to an intra-week high of roughly $119 before settling at $99.31 on Friday. This uncertainty sent the CBOE Volatility Index (VIX) on a spike to 35.3, though it eventually exhaled to 27.19. While we’d prefer to see the VIX back in its "comfort zone" below 20, the current reading confirms that the market’s "Check Engine" light is flashing bright red.
Under the Hood: The CPI & Core CPI Breakdown
Last week’s Consumer Price Index (CPI) report was perhaps the most scrutinized data point outside of the Strait of Hormuz. While the headline figures initially appeared to be "in line," a closer look at the internals reveals why the bond market remains on edge.
Headline CPI: Increased 0.3% MoM, bringing the YoY rate to 2.4%. On the surface, this matches estimates, but the "surface" is doing a lot of heavy lifting. The recent surge in energy—specifically a 45% monthly jump in crude—hasn't fully filtered through to the pump yet due to the lag in retail pricing.
Core CPI (Ex-Food & Energy): This rose 0.2% MoM and 2.5% YoY. While these numbers met expectations, they illustrate the "sticky" nature of services inflation. We are seeing a tug-of-war: goods prices are normalizing, but shelter and insurance costs remain stubbornly high.
The concern for investors is "secondary inflation." If energy prices remain near $100 per barrel, the cost of transporting everything from avocados to semiconductors rises. This threatens to turn a stable 2.5% Core CPI into a rebounding one, complicating the Fed's path toward any eventual easing.
The Behavioral Trap: Quality Over Price
It is a classic tale of human nature: during periods of high-octane uncertainty, fear often overrides the owner's manual. Many investors are tempted to "get out" just when they should be looking for opportunities to "get in" at a discount. We must resist the common behavioral mistake of letting emotions dictate strategy.
While the geopolitical headlines are noisy, they shouldn't drown out the fact that we are living through a generational shift in global growth. Beyond the current conflict, the long-term "signal" is powered by a new industrial revolution: Digitalization, Electrification, the New Space Frontier, and Re-globalization. As Buffett suggests, we aren't looking for "cigar butts"—fair companies at bargain prices—we are looking for the wonderful companies leading these charges that are opportunistically trading at attractive valuations due to this panic.
The data coming out of Washington shows an economy softening, but not a recession, under the weight of last fall's shutdown and current energy shocks:
GDP & Manufacturing Drags: The second estimate for Q4 GDP was revised down to just 0.7%. Even accounting for the 1.00%–1.20% drag from the government shutdown, the underlying pace is tepid. Furthermore, Durable Orders were flat (0.0% vs. 1.0% expected), marking declines in three of the last four months.
The PCE Warning: The Fed's preferred metric—Core PCE—ticked higher to 3.1%. With the labor market remaining resilient (Initial Jobless Claims at 213K and JOLTs at 6.946M), the Fed does not appear to have an immediate "emergency" reason to cut rates to support growth.
The Week Ahead: The FOMC High-Stakes Tightrope
The focus now shifts entirely to the FOMC meeting this Wednesday. Historically, the Fed likes to "look through" temporary energy shocks, but the current context makes that difficult.
The contradictory data—tepid GDP growth versus a resilient labor market and "hot" PCE—leaves the Fed in a bind. We expect a "Hold" on interest rates (3.50%–3.75%), but the real story will be the "dot plot." If the Fed signals that the Iran-driven oil spike has pushed rate cuts out of 2026 entirely, the market could see further repricing. However, if Chair Powell emphasizes "patience" and a willingness to support the weakening growth side of the mandate (the 0.7% GDP print), we might see a relief rally.
Discipline remains our North Star. We are trading blows in a volatile range, but Sowell’s investment philosophy reminds us to keep our eyes on the fundamentals and horizons.
“Yes, we [Apple] have a lot of intellectual property and so forth and that is important. But it's people that create that intellectual property. It's the culture that creates the innovation with the intellectual property. And this culture, if you feed it and nurture it, it sustains itself and grows and evolves.”
— Apple CEO Tim Cook Interview, CBS Sunday Morning, Mar 8, 2026
AI: The Next Great Deflationary Force
By Gregory Lai, Affinity Investment Advisors
Recently, I used an artificial intelligence tool to build a simple web application. Not long ago, a project like that might have required hiring a developer, spending a couple of weeks writing code, and costing perhaps $10,000 or more.
Instead, it took about 90 minutes.
Which raises an interesting question:
Is AI priced too cheaply, or are many services about to become dramatically cheaper?
Cover your ears, goldbugs.
Artificial Intelligence has quickly become one of the most talked-about themes in markets—and around water coolers. Podcasts debate which companies will dominate the AI race, which chips will power the data centers, and whether valuations have run too far ahead of reality. But focusing only on the winners in the stock market may miss the bigger economic story. We’ve seen that before in the rise of those “other” names that quietly reshape industries.
AI may ultimately matter less for which companies build it and more for how dramatically it improves productivity across the entire economy. As a long-time investor, I have to believe that this is where the real opportunity lies: go where they ain’t…yet. Throughout history, major technological breakthroughs have consistently driven productivity higher while reducing costs. Electricity transformed manufacturing. The internet revolutionized communication and commerce.
Artificial intelligence may do both—only faster. At least that’s what my Descript avatar told me last night after AI sampled my voice, rewrote my script, and then created a version of me that looked 15 years younger based on my LinkedIn photo. My wife called it creepy. For decades, technology has relentlessly driven down the cost of computation. According to the U.S. Bureau of Labor Statistics, the price of computing power has fallen by more than 99% since the 1990s.
At the same time, productivity growth has historically accelerated during major technological transitions. During the internet boom of the late 1990s, U.S. labor productivity growth reached roughly 3% annually, nearly double the long-term trend.
I believe artificial intelligence could trigger a similar productivity shift.
Goldman Sachs estimates that AI-driven productivity gains could increase global GDP by as much as 7% over the next decade, while McKinsey estimates generative AI could add between $2.6 trillion and $4.4 trillion annually to global economic output. Those numbers are enormous—but the mechanism behind them is simple.
AI allows people and businesses to do more with less.
Software developers can write code faster. Analysts can process data in minutes rather than days. Customer service systems can respond instantly rather than waiting in queues. Entire workflows—from marketing to legal research—can now be automated or dramatically accelerated. Oh, and don’t forget cars driving themselves. Who will need insurance then?
Over time, those efficiencies tend to show up in one of three places:
• Lower costs for consumers
• Higher margins for companies
• Greater economic output overall
Often, the result is a powerful deflationary force.
This doesn’t mean inflation disappears. Economic cycles will always exist, and supply shocks will continue to occur, just like we’re seeing today in oil markets. But technology has historically been one of the most reliable long-term forces pushing prices downward. The cost of storing data, transmitting information, and performing complex calculations has fallen dramatically over the past few decades.
Artificial intelligence may extend that dynamic across far more industries. For investors, this creates both opportunities and challenges. The most obvious opportunity lies in identifying the companies building AI infrastructure—from semiconductor firms to cloud providers.
But history suggests the largest productivity gains may ultimately occur in companies that apply AI effectively, not just those that build it. In other words, the true winners may be the businesses that quietly use AI to operate faster, cheaper, and smarter than their competitors.
That opportunity can happen on every street corner.
The Paradox of Productivity
But AI raises an interesting philosophical question:
What happens when people suddenly have more time?
If artificial intelligence allows workers to complete tasks in minutes that once required hours—or even weeks—then productivity rises dramatically. Businesses produce more with fewer inputs, and the economy becomes more efficient.
But human nature doesn’t always follow the neat logic of economics. History shows that when societies become more productive, they don’t simply stop striving. Instead, the nature of competition shifts. The Industrial Revolution didn’t eliminate competition; it intensified it. The internet didn’t eliminate rivalry; it accelerated it.
AI may do the same.
Even if technology frees up time and lowers costs, human ambition, creativity, and yes, ego, will likely fill the gap. Companies will compete harder. Entrepreneurs will build new industries. Nations will race to dominate emerging technologies.
The battleground simply changes. Instead of competing primarily with physical labor, societies compete with ideas, innovation, and speed. In that sense, AI may not reduce competition. It may amplify it. But that’s not necessarily a bad outcome.
Economic progress has always been driven by this tension: technology makes us more efficient, and human ambition pushes us to do even more with that efficiency. The result is growth.
And if artificial intelligence truly unlocks another wave of productivity, it could reshape industries, lower costs across the economy, and expand global prosperity. The machines may be getting smarter, not more hostile.
But the future will still be shaped by the most powerful force in markets—and in history:
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
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WEEK AHEAD
March 16-20, 2026
“It's better to buy a Wonderful Company at a Fair Price than a Fair Company at a Wonderful Price”
— Warren Buffett, 1989 Berkshire Hathaway Shareholder Letter
The market last week was behaving a bit like a luxury sedan that just hit a massive, unmapped pothole. We started the year with the wind at our backs, but the recent "Iran curveball" has turned a Sunday drive into a test of suspension and driver discipline. Last week’s volatility serves as a stark reminder of Warren Buffett’s timeless wisdom: our focus should remain on the quality of the "machine" we are driving, not just the temporary fluctuations in the price of the fuel.
Market sentiment can turn faster than a sports car on a wet track. On January 31st, the S&P 500 was sitting pretty with a 1.45% YTD gain. Fast forward to March 13th, and the index is staring down at a -2.86% YTD return. That is a 4.31% swing in just two weeks, largely fueled by the Iran conflict and the vertical move in energy prices.
WTI Crude futures screamed to an intra-week high of roughly $119 before settling at $99.31 on Friday. This uncertainty sent the CBOE Volatility Index (VIX) on a spike to 35.3, though it eventually exhaled to 27.19. While we’d prefer to see the VIX back in its "comfort zone" below 20, the current reading confirms that the market’s "Check Engine" light is flashing bright red.
Last week’s Consumer Price Index (CPI) report was perhaps the most scrutinized data point outside of the Strait of Hormuz. While the headline figures initially appeared to be "in line," a closer look at the internals reveals why the bond market remains on edge.
The concern for investors is "secondary inflation." If energy prices remain near $100 per barrel, the cost of transporting everything from avocados to semiconductors rises. This threatens to turn a stable 2.5% Core CPI into a rebounding one, complicating the Fed's path toward any eventual easing.
The Behavioral Trap: Quality Over Price
It is a classic tale of human nature: during periods of high-octane uncertainty, fear often overrides the owner's manual. Many investors are tempted to "get out" just when they should be looking for opportunities to "get in" at a discount. We must resist the common behavioral mistake of letting emotions dictate strategy.
While the geopolitical headlines are noisy, they shouldn't drown out the fact that we are living through a generational shift in global growth. Beyond the current conflict, the long-term "signal" is powered by a new industrial revolution: Digitalization, Electrification, the New Space Frontier, and Re-globalization. As Buffett suggests, we aren't looking for "cigar butts"—fair companies at bargain prices—we are looking for the wonderful companies leading these charges that are opportunistically trading at attractive valuations due to this panic.
Economic Dashboard: Tepid Growth Meets Sticky Prices
The data coming out of Washington shows an economy softening, but not a recession, under the weight of last fall's shutdown and current energy shocks:
The Week Ahead: The FOMC High-Stakes Tightrope
The focus now shifts entirely to the FOMC meeting this Wednesday. Historically, the Fed likes to "look through" temporary energy shocks, but the current context makes that difficult.
The contradictory data—tepid GDP growth versus a resilient labor market and "hot" PCE—leaves the Fed in a bind. We expect a "Hold" on interest rates (3.50%–3.75%), but the real story will be the "dot plot." If the Fed signals that the Iran-driven oil spike has pushed rate cuts out of 2026 entirely, the market could see further repricing. However, if Chair Powell emphasizes "patience" and a willingness to support the weakening growth side of the mandate (the 0.7% GDP print), we might see a relief rally.
Discipline remains our North Star. We are trading blows in a volatile range, but Sowell’s investment philosophy reminds us to keep our eyes on the fundamentals and horizons.
AI: The Next Great Deflationary Force
By Gregory Lai, Affinity Investment Advisors
Recently, I used an artificial intelligence tool to build a simple web application. Not long ago, a project like that might have required hiring a developer, spending a couple of weeks writing code, and costing perhaps $10,000 or more.
Instead, it took about 90 minutes.
Which raises an interesting question:
Is AI priced too cheaply, or are many services about to become dramatically cheaper?
Cover your ears, goldbugs.
Artificial Intelligence has quickly become one of the most talked-about themes in markets—and around water coolers. Podcasts debate which companies will dominate the AI race, which chips will power the data centers, and whether valuations have run too far ahead of reality. But focusing only on the winners in the stock market may miss the bigger economic story. We’ve seen that before in the rise of those “other” names that quietly reshape industries.
AI may ultimately matter less for which companies build it and more for how dramatically it improves productivity across the entire economy. As a long-time investor, I have to believe that this is where the real opportunity lies: go where they ain’t…yet. Throughout history, major technological breakthroughs have consistently driven productivity higher while reducing costs. Electricity transformed manufacturing. The internet revolutionized communication and commerce.
Artificial intelligence may do both—only faster. At least that’s what my Descript avatar told me last night after AI sampled my voice, rewrote my script, and then created a version of me that looked 15 years younger based on my LinkedIn photo. My wife called it creepy. For decades, technology has relentlessly driven down the cost of computation. According to the U.S. Bureau of Labor Statistics, the price of computing power has fallen by more than 99% since the 1990s.
At the same time, productivity growth has historically accelerated during major technological transitions. During the internet boom of the late 1990s, U.S. labor productivity growth reached roughly 3% annually, nearly double the long-term trend.
I believe artificial intelligence could trigger a similar productivity shift.
Goldman Sachs estimates that AI-driven productivity gains could increase global GDP by as much as 7% over the next decade, while McKinsey estimates generative AI could add between $2.6 trillion and $4.4 trillion annually to global economic output. Those numbers are enormous—but the mechanism behind them is simple.
AI allows people and businesses to do more with less.
Software developers can write code faster. Analysts can process data in minutes rather than days. Customer service systems can respond instantly rather than waiting in queues. Entire workflows—from marketing to legal research—can now be automated or dramatically accelerated. Oh, and don’t forget cars driving themselves. Who will need insurance then?
Over time, those efficiencies tend to show up in one of three places:
• Lower costs for consumers
• Higher margins for companies
• Greater economic output overall
Often, the result is a powerful deflationary force.
This doesn’t mean inflation disappears. Economic cycles will always exist, and supply shocks will continue to occur, just like we’re seeing today in oil markets. But technology has historically been one of the most reliable long-term forces pushing prices downward. The cost of storing data, transmitting information, and performing complex calculations has fallen dramatically over the past few decades.
Artificial intelligence may extend that dynamic across far more industries. For investors, this creates both opportunities and challenges. The most obvious opportunity lies in identifying the companies building AI infrastructure—from semiconductor firms to cloud providers.
But history suggests the largest productivity gains may ultimately occur in companies that apply AI effectively, not just those that build it. In other words, the true winners may be the businesses that quietly use AI to operate faster, cheaper, and smarter than their competitors.
That opportunity can happen on every street corner.
The Paradox of Productivity
But AI raises an interesting philosophical question:
What happens when people suddenly have more time?
If artificial intelligence allows workers to complete tasks in minutes that once required hours—or even weeks—then productivity rises dramatically. Businesses produce more with fewer inputs, and the economy becomes more efficient.
But human nature doesn’t always follow the neat logic of economics. History shows that when societies become more productive, they don’t simply stop striving. Instead, the nature of competition shifts. The Industrial Revolution didn’t eliminate competition; it intensified it. The internet didn’t eliminate rivalry; it accelerated it.
AI may do the same.
Even if technology frees up time and lowers costs, human ambition, creativity, and yes, ego, will likely fill the gap. Companies will compete harder. Entrepreneurs will build new industries. Nations will race to dominate emerging technologies.
The battleground simply changes. Instead of competing primarily with physical labor, societies compete with ideas, innovation, and speed. In that sense, AI may not reduce competition. It may amplify it. But that’s not necessarily a bad outcome.
Economic progress has always been driven by this tension: technology makes us more efficient, and human ambition pushes us to do even more with that efficiency. The result is growth.
And if artificial intelligence truly unlocks another wave of productivity, it could reshape industries, lower costs across the economy, and expand global prosperity. The machines may be getting smarter, not more hostile.
But the future will still be shaped by the most powerful force in markets—and in history:
Human nature.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.