Morning Bulletin: Capital Preservation in a Fracturing Market

The broad US equity market is opening with significant weakness this morning, March 19, 2026, with the S&P 500 and Nasdaq Composite under sharp pressure and YTD broad market declines now around the -4% mark as volatility spikes across leadership names. In my framework, the Capital Preservation regime is now the primary reality for every allocator whose first mandate is survival rather than style-box conformity.​

Why I Went to 100% Cash

On February 27, I moved my entire portfolio to 100% cash. This was the culmination of a process that had already taken me to roughly 80% cash, driven both by external demands on my time and by the growing threat of a major religious-based war in the Middle East. The expected-value math flipped: as leadership narrowed and geopolitical risks moved to the foreground, the distribution of outcomes shifted toward asymmetric downside, not upside optionality.

Despite a difficult start to the year in which I realized losses across a number of positions, disciplined risk management still produced a modest positive result heading into the exit. From January 1 to February 27, my average performance across 48 positions was +2.331%. Within that, the 8 to 14 US defense names I held specifically for this war-tied environment closed up +12.490% when I exited them on February 27, validating the thesis but not justifying overstaying the trade.

Rates and Plumbing: What Has Changed in Recent Weeks

In the background, the market “plumbing” has become steadily less friendly to risk assets. The US 10‑year Treasury yield has pushed back above mid-range 4.2%–4.3% in recent sessions, trading at 4.28% this morning (March 19), up from just under 4.0% at the end of February. That +30 basis point backup in long rates in a matter of weeks is not just noise; it raises the discount rate on every long-duration cash-flow story and tightens financial conditions into weakness rather than providing relief.​

At the same time, the secured overnight financing rate (SOFR) remains pinned in the 3.65% area, with daily prints around 3.62%–3.70% through mid‑March. In other words, the front end has not meaningfully eased, and the cost of secured dollar funding in the wholesale banking system remains elevated relative to the last several years. This combination -- grindingly firm SOFR complex and a 10‑year yield backing up toward the high end of its recent range — tells you that both the policy and term-structure backdrops are still restrictive, even as equities wobble.

This is exactly the wrong mix for crowded, duration-heavy trades: credit still looks calm on the surface, but the compensation for taking long-duration equity and credit risk is eroding at the margin rather than improving.

Current Market Regime

My base case is that the US–Israel–Iran conflict has moved from tail risk to the primary driver for oil, LNG, and key global trade routes. This shift is now the central macro input, not an “overlay.” Energy has emerged as the only reliable leadership complex (including names like KOS, DVN, FANG, SU, CNQ), but what is good for energy here is bad for almost everything else: higher input costs, sticky headline inflation, and a Federal Reserve that remains constrained from delivering the kind of dovish pivot that would normally cushion equity drawdowns.

Traditional defensives are failing their stated purpose. Packaged foods and dollar-store names such as DG, DLTR, and MKC are cracking, revealing the dangers of crowding into the same “safety” buckets at the same time. When everyone hides in the same cul‑de‑sac, that cul‑de‑sac becomes its own risk factor.

Credit has so far lagged the level of anxiety we see in equities and geopolitics, but that should not be mistaken for an all‑clear. Credit spreads are the next alarm bell to watch; when credit finally “catches down” to what equities are already signaling, it will not ring a bell first.

Strategic Directives for Capital Preservation

In this regime, I am treating cash not as an embarrassment but as a strategic asset class. The job is to protect retirement capital and “cannot‑lose” savings until both the tape and the plumbing realign into a more balanced risk‑reward profile.

My current directives are:

• Treat cash as a necessary, albeit temporary, asset class for capital preservation, not as a market-timing tactic.
• For existing energy winners, consider harvesting roughly 25%–33% of gains to raise cash rather than aggressively adding to the complex into geopolitical euphoria.
• Use “deep laggards” and broken AI leaders (including high-beta names like NVDA and SMCI that have for now lost their trend and sponsorship) as sources of liquidity, not as value opportunities.
• Maintain an overweight in duration via high‑quality sovereigns as a hedge against volatility spikes that are now a structural feature rather than a bug.

None of this is panic. It is process. We are protecting capital that cannot easily be replaced in a world where macro tails are getting fatter, not thinner, and where both long rates and bank funding costs are quietly reminding us that the cost of capital is high and rising, not cheap and benign.