Why it’s best to conduct lifeboat drills in calm water

We want to talk about the markets. Not because they are volatile…but because they are calm.

We have never been one to predict markets, and we certainly won't start now. But we've been in this business for many years. We have seen good times, bad times, and everything in between.

Right now, we are seeing a ton of excitement and cash spent building AI and all the infrastructure around it. This isn't the first time a new technology has come along and changed the world. We saw the steam engine and railroads spread throughout the country. From the first glimmer of light in Thomas Edison's workshop to the modern power grid we have now. Diseases that would have killed you fifty years ago are now nothing more than a mild inconvenience. And of course, the internet and personal computer changed everything too.

All were exciting. All changed the world. All were expensive. And all, at some point, were

overbuilt or overexpanded. Each brought change, excitement, capital spending, and yes, fear.

That leads us to where we are today. There is more and more fear building around AI. Not just

the technology itself, but the capital spent on it and the debt taken on to fund that spending. Debt that has many people wondering: Is this a bubble?

We are often asked that question. “Is this a bubble?” Our answer: We have no idea. We honestly believe no one knows that with any real certainty. Nobody rings a bell at the top.

Here is what we do know. If it does turn out to be overbuilt, history tells us these things tend to

unwind over time, not all at once. That doesn't mean there won't be sharp moments along the

way; there usually are. We watch valuations, debt levels, and how companies are actually

spending that capital. That is what active management is for. Not predicting the future, but

paying attention to it.

These days, many people are solely “passive investors.” Passive investing says, "just buy the

index." If a company is in the S&P 500, you own it. Great company? You own it. Overpriced

company? You own it too. There is no real decision being made. You simply accept whatever the index gives you.

Active management is different. There are actual people behind the portfolio doing the work.

Studying companies. Meeting with management teams. Looking at valuations. Deciding what is

worth owning and what isn't.

The indexes you see in the headlines are heavily weighted in just ten stocks. Right now, those ten make up about 40% of the S&P 500.¹ That isn't diversification. That's concentration. We are glad our portfolios don't run that concentrated.

While we believe active management to be a real advantage, it does not mean we are shielded from a dip. Our portfolios still hold equities (stocks), and they move with the broader market. If stocks fall, we will feel some of that too. What active management gives us is the ability to make decisions during that fall, not immunity from it.

We own equities by choice, because we believe you have to own stocks in a world of ever increasing prices. Stocks have historically been one of the only investments that consistently

grows purchasing power over time.

That growth comes with a price. Fluctuations in the short term, and sometimes severe

fluctuations. Going back to 1945, the average bear market has brought a decline of around a 1/3.² It is also worth remembering that every one of those bear markets ended, and the market went on to new highs afterward. The pain has always been temporary. The growth has always outlasted it. That trade-off, short-term discomfort for long-term gain, is the price of admission to long-term financial independence.

We don't mean for this letter to be doom and gloom. It's far from that. We are optimistic about the long-term future of our investments. But we have done this long enough to know that rough seas can arise from time to time. And as a ship does at sea, it's better to run a lifeboat drill in calm waters than when the storm is raging.

We believe in our investments. We believe in our money managers. We believe in the plans

we've built together to help you reach your dreams and goals. Rough seas will come, but just as

they come, they will pass. Your team will be here to guide you through both calm and rough waters.

In the meantime, if you have any questions or concerns about the markets, AI, or anything else, we always welcome the opportunity to talk with you. Thank you again for allowing us to be your captains in both calm and rough seas.

Sincerely,

The Omell Financial Group

¹ The 10 largest companies in the S&P 500 account for about 41% of the index's total weight, down slightly from a

2025 peak. Source: Visual Capitalist, April 2026. https://www.visualcapitalist.com/sp/largest-sp-500-stocks-in-2025-

tema-01/

² Since 1945, the S&P 500 has fallen an average of 33% during bear markets. Source: CBS News/PBS News, citing

market data through 2025. https://www.cbsnews.com/news/what-is-a-bear-market-stocks/

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