February sent shockwaves through markets as the potential implications of artificial intelligence forced a broad repricing of business models across industries, with software companies bearing the sharpest impact. While the broad indices have remained roughly flat on the year, that calm surface masks the dramatic rotation beneath as individual stocks have swung sharply in both directions as investors reassess what AI means for long-term earnings power.
As we outlined in our 2026 Outlook, we entered the year favoring value over growth, a positioning that has proven its merit. The market has broadly coalesced around a framework now being described as “HALO” — Heavy Assets, Low Obsolescence risk — and companies fitting that profile have outperformed meaningfully, disproportionately benefiting the value-oriented portion of client portfolios.
One area we are monitoring closely is private credit, where concerns have begun to surface around portfolios with meaningful exposure to software companies. After more than a decade of stellar performance, the asset-light nature that made these businesses so attractive to lenders is now a source of scrutiny, as the trajectory of their earnings has become less clear. While we expect headlines in this space to continue, and for good reasons, we do not view this as a reason to exit the asset class. Private credit continues to offer clients meaningful diversification and an attractive risk-adjusted return profile, and we remain constructive on its role in a well-structured portfolio.
As we approach the midterm election cycle, expect affordability to become an increasingly prominent theme from the administration. This is consistent with the two-tiered economic picture we have described in prior commentary, a divide between lower-income households absorbing years of cumulative price pressure and higher-income households that have remained largely insulated. What has begun to capture our attention is whether those pressures could migrate upward. A recent report from Citrini Research offered a thought-provoking analysis of how AI-driven disruption may begin to affect white-collar employment, the kinds of roles that have historically anchored the financial security of middle-to-upper-income households. It is a thesis worth taking seriously, though we would note that structural shifts in corporate hiring and cost planning unfold over years, not days.
We continue to believe that a balanced approach pairing selective exposure to high-quality, AI-leveraged growth companies with a more value-oriented core positions clients well across a range of outcomes. The volatility of recent months reinforces rather than undermines that conviction. We will continue to monitor developments across each of these themes and look forward to sharing our perspective as the picture evolves.
Information in this commentary is gleaned from third-party sources, and while believed to be reliable, is not independently verified. This content is not intended to be tax, legal, investment, or fiduciary advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this material may not be suitable for all investors. Bernardo Wealth Planning recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. Past performance does not guarantee future results.