Hi there Traders and Investors,
Todd here. I hope this finds you well and your portfolios…well, hopefully protected. Instead of a video this week, I wanted to put pen to paper and walk you through how we’re interpreting recent market developments and how we’re working to insulate our investors from the current volatility.
The NASDAQ 100 has officially broken down from what has been a vicious, sideways, geopolitically driven range that nearly reached its 6-month mark. Support at $580 in the QQQ was broken this week, and the next logical downside target is the late 2024 / early 2025 pivot around $540. This also aligns with the 38% Fibonacci retracement from the early 2025 lows (not shown on the chart), roughly 5% below current levels.
I’m not certain we get there, but across our three main equity portfolios we’ve been proactively shifting more defensive in anticipation of a breakdown from this range. We’ve been raising cash from growth and AI positions and reallocating into energy and inverse hedges to help smooth volatility. I’ll walk through both, but first, it’s worth revisiting our three core principles at Inside Edge Capital
- Comprehensive financial planning and risk tolerance assessment are essential to proper portfolio construction
- Investing in the averages is for the average investor. We focus on best-in-class companies that earn a place in our portfolios
- Active portfolio management seeks to reduce volatility in bear markets and outperform in bull markets, giving investors confidence to stay disciplined and trust the process
And right now, we are locked in.
The overlap between the baseball offseason, ski season, and this market environment has been interesting. As the cold and snow rolled into upstate New York and ski racing ramped up (I coach 12U at West Mountain), markets froze up as well. We saw a retest of the highs on January 28th, 2026, and since then it’s been all downhill skiing.
This past Wednesday marked our final day of ski practice at West. Bittersweet. I won’t miss freezing five days a week on the hill, but I had the privilege of coaching some of the best 12U racers in New York, including my son Jake. The very next day, the 6-month range finally broke down. It also happened to be Opening Day for MLB. Not thrilled it broke lower, but at least it broke. We can work with that.
As mentioned earlier, we’ve been raising cash by trimming underperforming growth names and rotating into energy.
Take a look at the Technology Sector SPDR (XLK). It made a new high in October, but then put in a lower high while the S&P 500 pushed to a higher high in February. That divergence was an early warning sign. We adjusted accordingly, even as enthusiasm around AI remained extremely high. The long-term story is likely intact, but it’s not going to be a straight line.
Here’s how our technology exposure in the Tactical Alpha Growth (TAG) portfolio has evolved across the last four reallocations. The S&P 500 sits at roughly 34% tech:
- 28.50% -Sep 15th, 2025
- 26.50% – Nov 20th, 2025
- 22.50% – Dec 17th, 2025
- 16.50% – Feb 3rd, 2026
And here’s what we’ve done with energy exposure in the Strategic Income and Growth (SIG) portfolio, compared to the S&P’s roughly 4% weighting:
- 5% -Sep 15th, 2025
- 7% – Nov 20th, 2025
- 6% – Dec 17th, 2025
- 9% – Feb 25th, 2026
- 14% – March 20th, 2026
The result has been significant. Over the last six months, XLE is up 38% while the S&P 500 is down 3.92%.
Over the past two months, we’ve also deployed inverse ETFs as hedges against a breakdown from the range. Specifically, 10% of TAG is allocated to PSQ and QID, and 5% of SIG is in PSQ. These positions won’t eliminate downside, but they help reduce drawdowns and give us capital to redeploy when the next leg higher begins.
Inside Edge Capital turns five years old this October, and while that’s not a long history, we’ve seen this type of environment before. In 2022, following the post-COVID surge in fiscal and monetary stimulus, energy outperformed dramatically. We leaned into that trend early in our firm’s life and were tested right out of the gate.
From our inception on October 4th, 2021 through late 2023, SIG outperformed while maintaining elevated energy exposure, at times reaching 10% compared to the S&P’s roughly 3.5%. We’ve seen this movie before.
Markets don’t repeat, but they rhyme. I touched on this briefly in my CNBC appearance yesterday, discussing interest rates, the pullback in gold, and the renewed strength in energy.
Here’s the segment:
We’ll go deeper next week, but I’ll leave you with the notes I sent to my producer. It may feel heavy right now as markets press toward the lows of the day, but the faster we shake out weak hands and emotional, unplanned investors, the closer we are to a bottom.
We are hedging and reducing exposure, but we are also ready. The moment we see credible signs of de-escalation in the Middle East, a wave of buyers will step in. First through short covering, then through fresh capital. The spring thaw is coming. I believe the same will soon be true for the stock market.
CNBC Notes To Producer – March 26th, 2026
Reduced holdings in gold March 20th – Surprising as US stock indexes are pressing range lows amidst geopolitical and monetary policy stress – one would think you want to increase gold exposure. However, well before the Iranian conflict, gold was positively correlated with the stock market, particularly the growth trade. Many don’t understand this:
- US rates moved higher due to persistent inflation expectations; consequently, no more rate cuts are priced in for 18 months, keeping the US Dollar Index bid and pressuring gold
- However, the key to understanding gold is understanding real interest rates.
- Real rates moving higher –> nominal rates are moving higher at a faster rate than expected inflation – negative for gold – see attached chart
- Inflation viewed to be sticky from the strong energy trade – combined with supply shock plus continued systemic demand from slowed expected transition to clean energy
- Roughly half from geopolitical/supply shock premium,
- 30% or so from strong fundamentals – cash flow, balance sheet, margins, dividends
- 20% markets walking back aggressive fossil fuel demand decline assumptions, plus AI/data center power as a new demand tailwind
- Increased Energy exposure from 2% of portfolio in December to 10% in March.
- Positions Adjusted:
- Cut AU – Anglogold Ashanti PLC
- Cut AEM – Agnico Eagle Mines Ltd
- Cut KGC – Kinross Gold
- Kept Wheaton WPM, Pan American Silver PAAS, and Southern Copper SCCO – so not completely out
- Gold / Silver ratio trading about 65 – if 70 resistance breaks (gold outperforming silver) that’s an old school RISK-OFF macro indicators to equities – foretells a breakdown of the 6-month range in US stock indexes
Bottom line, gold and gold mining stocks would be an assumed safe haven in this market volatility, particularly if the stock index range lows are broken, but lower equities (which we’re hedged) will likely accompany lower gold prices as inflation remains and Fed is handcuffed..until there’s a significantly slowdown in the economy hitting the labor market.
