Investment Insights

The first few months of 2026 have shown how quickly market expectations can be impacted by real world events. Shortly after our last quarterly update letter, the Middle East conflict began in late February. This led to a jump in oil prices, forcing a reassessment of the likely path of inflation, interest rates, and GDP growth. Oil (WTI) peaked at $112.95 on April 7, up by 97% from the start of the year ($57.42). As of this writing, oil has declined somewhat, to a level in the low $90s, but is still up over 60% year-to-date.

This exogenous shock led equity markets to decline during the first quarter, with a total return for the S&P 500 of -4.4% for 1Q26. Global equities also declined with the MSCI World down -3.5%. The tech-heavy Nasdaq was the laggard, falling by -7.0% in 1Q26. Looking at other indicators for the third quarter, both gold (XAU, +7.8%) and US dollar index (DXY) (+1.6%) climbed. The benchmark 10-year US Treasury yield (UST10) rose during the first quarter, starting at 4.17% and ending at 4.32 % (up +15 bps).

The key global development in the first quarter was the eruption of hostilities in the Middle East, with U.S. led strikes on Iran. Iran subsequently moved to block the Strat of Hormuz, through which roughly 20% of the world’s daily oil supply flows. Despite a brief ceasefire agreement, the conflict continued with a U.S. blockade for ships passing through the Strait. We remain hopeful that a deal can be struck between all parties, despite the competing agendas and alliances in the region. Still, we believe that the price of oil is likely to stay elevated in the near-term as there is reportedly extensive damage to oil production facilities in the Gulf region. The consequence of higher oil prices is likely to delay the path back to the Fed’s 2.0% inflation target

Indeed, the Fed has held rates steady so far this year, after cutting rates by -100 bps in 2025. After pricing in two -25 bps cuts in rates at the start of the year, Fed funds futures currently indicate a less than 50% chance of any further cuts this year, and are even pricing in some slight chance of a rate hike. Meanwhile, U.S. economic growth has remained relatively muted, with 4Q25 GDP growing only 0.5% on a seasonally adjusted basis, and advance 1Q26 GDP growth of 2.0%.

We note that after the first quarter declines in equities, the more recent trend has been higher, following the continuation of AI-driven rally in tech equities. The Nasdaq index has hit multiple new all-time highs, and crossed the 25,000 mark for the first time in May 2026. As we survey the investment landscape in 2026, we highlight the volatile outlook, but emphasize that a long-term asset allocation framework is just that— long-term. We encourage clients to look past the noise and stay invested despite the uncertain environment. We reiterate our view that well-diversified, actively-managed equity portfolios should demonstrate long term positive performance alongside global growth. We also believe that fixed income exposure provides steady income and less volatility, even if bonds have less capital appreciation potential than in years past given persistent inflation.

Portfolio Changes

Following the conclusion of the quarter, our Investment Committee has elected to maintain the majority of allocations. For equities, we maintain our quality focus with allocations to U.S. core and large cap, complemented by international, small/mid-cap emerging markets equities with only a modest adjustment in the dividend equities with a slightly higher tilt to growth. For fixed income, we modestly increased our allocation to securitized assets while modestly decreasing our global bond allocation, in order to capitalize on high quality credit with attractive yields. We also maintained our allocation to “real assets” which was initiated last quarter with the goal of acting as a diversifier to the portfolios over time.

Amerant has continued its partnership with global investment management firm BNY Mellon on the advisory portfolios, and any changes in the portfolios that are approved by the Investment Committee will be implemented at our discretion. We will continue to communicate any future changes to the portfolios to clients going forward.

Summary Market Views

In the table below, we update our Amerant Market Views, which represent our investment team’s most recent views based on investment valuations and macro trends. As a reminder, these are not client-specific recommendations, and clients should always consider their long-term financial goals and objectives when determining their asset allocations.

We maintained our views for the most recent quarter despite geo-political developments, market volatility and an uncertain interest rate outlook. We believe that it is imprudent to “over trade” and maintain our constructive view of markets with a tilt toward growth in equities and yield in fixed income.

This information is being provided for informational and educational purposes only to support our general market commentary. It should NOT be interpreted as investment advice regarding any specific security or investment strategy. See the disclosures at the end of this presentation for additional important information.

What to Expect for Second Half of 2026  

Despite war in the Middle East, U.S. markets have been focused on the implications of AI-led investments. Long term productivity gains are still expected, but the near-term impact is more on capital expenditures to build out AI-capacity.

We remain cautious that the elevated level of capex for AI build out may prove to be unsustainable, and highlight that subsectors such as semiconductors have posted stellar year-to-date gains (SOX, up 70% as of this writing). We continue to believe broader participation across industries for market leadership would be healthier, and, in our opinion, equities remain vulnerable to shocks given high valuations. For fixed income, we see risks as balanced and believe this asset class is best for investors looking for income, rather than capital appreciation, for the year ahead with higher baseline rates generating the majority of total return.

Notes: Asset class performance is in USD and refers to the following indices: Equities: US Large Caps (S&P 500), Emerging Markets (MSCI EM), Europe (MSCI Europe), Japan (MSCI Japan). Fixed Income: 10-Yr. US Treasuries (BofAML US Treasury Current 10-Yr.), Emerging Markets Sovereign (USD) (EMB ETF), Emerging Markets Sovereign (LCL) (LEMB ETF), US High Yield (BofAML US HY Master II), US Investment Grade (BarCap US Aggregate Bond). Source: Morningstar. (1) Strategy returns net of mutual fund expenses and Amerant Investments standard management fees.

On these tables, you can see index and strategy returns for the first quarter of 2026.

The first quarter of 2026 experienced negative returns in U.S. and global equities along with mostly negative fixed income returns.

For the first quarter, returns were modestly negative across all strategies given the market headwinds highlighted above. The Income strategies continue to emphasize distribution income and posted flattish returns for the first quarter. All the funds included in the portfolios are hedged back to the U.S. dollar. As always, we will communicate any changes in our views and positioning going forward.

⁽¹⁾ Returns may vary. Past returns are no indication of future performance. Returns up to February 2020 are based on A shares, which were used on the portfolios up to that month, net of the then standard AMTI 1% management fee. Returns from March 2020 to June 2021 are based on I (or similar) shares, which have no 12b-1 fees, net of a standard AMTI 1.25% management fee. Returns starting July 2021 are based on I (or similar) shares, which have no 12b-1 fees, net of a standard AMTI 1% management fee.

For the one year through 1Q26, the Income Portfolio returned 6.2%, the Income & Growth Portfolio returned 8.6%, and the Growth Portfolio returned 9.8%.  The longer-term performance figures remain positive across all strategies.

As always, we take the trust you have placed in us very seriously. In our day-to-day operations, we continue to follow current events and the reactions of the markets closely, and we stand ready to adjust your portfolios accordingly.

To obtain more detailed information on our market views or the performance of your advisory portfolio, please contact your investment consultant at Amerant Investments by calling (305) 460-8599.

Sincerely,

Amerant Investments, Inc.

https://www.amerantbank.com/