From Seekingalpha · Brasada Capital · · 2m
Brasada Capital Q3 2026 Client Letter
Brasada Capital highlights market bifurcation and AI investment strategy amid rising interest rates.
In brief
Brasada Capital highlights market bifurcation and AI investment strategy amid rising interest rates. Brasada Capital advises long-term investors to focus on businesses with durable competitive advantages despite market volatility. Originally reported by Seekingalpha.
Market Performance
The S&P 500 returned 2.30% including dividends while its equal-weighted counterpart declined 1.87%.
Market Divergence
Smaller companies (Russell 2000) continued to lose ground to larger companies.
Historical Context
The internet transformed the world more than early evangelists envisioned but capacity was built out too quickly.
Cisco Systems Example
Cisco Systems briefly became the most valuable company before plummeting nearly 90% once excess capacity choked off customer orders.
Investment Strategy
We anchor investments to intrinsic value rather than chasing short-term price momentum.
AI Investment Focus
We believe AI remains a long-term opportunity but investment winners will be harder to predict than the market suggests.
GDP Growth
Second-quarter real GDP expanded at an annualized 2.2% with private domestic demand up 4.6%.
Consumer Spending
August real consumer spending advanced 0.6% year-over-year.
Inflation Impact
August PCE rose 3.4% year-over-year prompting Fed to lift policy rates to 3.75%-4.00% in September.
Energy Costs
Brent crude remained near $100 per barrel tightening corporate margins and consumer budgets.
Election Impact
S&P 500 has been higher 12 months after every midterm election from 1950 through 2022.
Tariff Adjustments
September U.S.-China discussions recommended more favorable tariff treatment on $30 billion of non-sensitive goods.
Infrastructure Investments
We focus on mission-critical 'picks and shovels' for AI and infrastructure expansion.
Non-Tech Holdings
We find value in essential franchises outside technology including pharmaceuticals and senior living.
Heico Performance
Heico has reported record results but is down for the year while S&P 500 is up.
Fixed Income Strategy
Treasury yields at 5.3% for 10-year and 5.6% for 30-year hover near 24-year highs.
The headline
Brasada Capital advises long-term investors to focus on businesses with durable competitive advantages despite market volatility.
