Weekly Investment Update (03/20/2026)

Geopolitical risk intensified this week as the conflict in Iran broadened, with energy infrastructure increasingly targeted and discussion shifting toward more aggressive measures to restore oil flows. We are monitoring developments closely. Markets are still weighing a range of outcomes, and a prolonged, worst-case shock is not yet the base case.

At the same time, policy and macro signals have become more complex. Inflation data have firmed, and the Fed struck a cautious tone following its most recent policy meeting, emphasizing patience in the face of higher energy prices. Markets have pushed out expectations for rate cuts, but importantly, policymakers continue to signal that their next move is more likely to be easing than tightening.

Encouragingly, the underlying growth and earnings backdrop remains supportive. Labor markets are stable, manufacturing activity is improving, and corporate profits are still expected to grow at a healthy pace. At the same time, artificial intelligence (AI) investment continues to expand, with companies such as Nvidia highlighting massive demand for next-generation infrastructure and a shift toward real-world deployment. While risks have clearly increased and we remain vigilant, the combination of resilient economic data, strong earnings, and continued innovation supports our view that markets can still move higher over the course of the year.

March Fed Rate Decision: Hawkish Hold, but Risks Still Skewed toward Rate Cuts

What is happening: The Fed left interest rates unchanged at 3.75%, as expected, and retained its easing bias. The median view in the Fed’s dot plot continued to pencil in one 25 basis point rate cut this year and one cut in 2027. Across the participants, there was some drift toward fewer rate cuts, as flagged by Chair Powell, alongside stronger growth and inflation projections, consistent with a short-lived oil shock. The number of participants calling for at least one cut this year was unchanged. Higher inflation projections reflected the recent oil price shock, though core inflation was also revised higher, setting a lower bar for inflation progress this year.

During the press conference, Powell struck a hawkish tone, emphasizing that further disinflation is required for rate cuts, downplaying the weak February jobs report, and noting that a rate hike was discussed. However, the vast majority of the committee do not see a hike as the base case. When asked about oil prices, Powell offered little conviction on the economic impacts given the high degree of uncertainty, implying a highly data-dependent outlook.

Why it matters: Global bond yields rose this week as central banks did not push back against the recent repricing in rates markets and the Middle East conflict continued. Market rate-cut expectations have been priced out with the next Fed move now expected to be a hike. Interest rate hikes continue to be priced in Europe and the UK where price impacts are more acute. Market pricing, in our view, is inconsistent with either a severe oil shock leading to a negative growth shock or a short-lived price increase that allows inflation to continue moving lower. What ultimately dictates policy in either direction is the incoming data, and risks remain skewed toward cuts. So while the bar to cut is high, the bar to hike is even higher for the Fed if inflation expectations stay anchored. Powell effectively communicated this by keeping already-restrictive policy in place while leaving the door open to rate cuts. We still believe the Fed’s next move is a cut, not a hike.

That said, the global cutting cycle is more in question, and high oil prices will keep hawkish central bank messaging in place for now. Furthermore, oil prices at these levels will push up inflation but are unlikely to cause swift economic damage or job cuts. Against this backdrop, bonds may continue to struggle, though it’s worth noting that U.S. 10-year bond yields still trade within recent ranges. We will continue to monitor business surveys, which were useful signals following the four prior oil shocks that proved to be recessionary. So far, business surveys, consumer sentiment, and inflation expectations have been resilient.

Bessemer portfolios are well diversified, and we remain vigilant in identifying opportunities amid market volatility. Our overweight to U.S. equities reflects our belief in their higher quality profile, with stronger margins and balance sheets providing resilience. The U.S. dollar also generally tends to perform well during periods of market stress. Portfolios are overweight communications services, semiconductors, and utilities, all of which have outperformed since the conflict. Within fixed income, portfolios remain long duration, which is an appropriate hedge to a prolonged oil price shock.

Nvidia Sees a $1 Trillion Opportunity as AI Moves into the Real World

What is happening: Nvidia’s flagship developer conference reinforced that demand for AI remains exceptionally strong. In his keynote, CEO Jensen Huang unveiled a new generation of Blackwell and Rubin semiconductor chips and systems, and made one of his boldest forecasts yet: Customers could order about $1 trillion of these products between 2025 and 2027, doubling the previous forecast of $500 billion through 2026. Large cloud providers, the so-called hyperscalers, continue to invest heavily in the AI data center buildouts at record levels. Demand for computing power is being driven by tools such as Anthropic’s Claude Code and the growing need for “inference,” the process of running AI models and applications.

The broader message from the conference was that the next phase of AI will center on practical deployment: AI agents, humanoid robots, and real-world applications such as factory automation. Nvidia positioned itself at the center of this shift, offering a full-stack AI platform that includes chips, software, and integrated systems spanning use cases from coding assistants to humanoid robots and digital replicas of real-world environments.

Why it matters: Nvidia’s role as the leading supplier of advanced AI chips has made it the world's most valuable company, and Huang's guidance is a key signal for the trajectory of the broader AI infrastructure investment cycle. The AI ecosystem is transitioning from building and training large models to deploying them in real-world applications. This week’s conference reinforces the shift in narrative on Nvidia from a company reliant on a one-off GPU cycle to a broader, long-term AI platform story.

Investors remain skeptical about the scale and durability of AI-related investments, which we believe is reflected in Nvidia’s valuation, currently near its lowest price-to-earnings multiple in eight years. Bessemer portfolios are overweight Nvidia relative to their benchmarks as we believe the company is a long-term beneficiary of rising AI infrastructure spending and the continued expansion of the AI ecosystem.