Blog post by Empower Wealth

Stability on Edge: VanEck’s April 2026 Summary

Please Note: This report was created and provided by VanEck.

“I bought my first stock in, probably, April of 1942, when I was 11. And since then, I mean, actually World War II didn’t look so good at that time.”
– Warren Buffett

This was the first quarter in over 55 years that Warren Buffett was not the CEO of Berkshire Hathaway, officially retiring on 31 December 2025. It’s been an eventful quarter without him, but we are reminded of the above memory he shared at his 1994 annual meeting. But as one of the greatest investors of all time, what would Buffett be looking to invest in now?

Conflicts are not good for markets, but the resulting volatility can provide opportunities. Wars lead to uncertainty, and right now there is a lot of uncertainty about the Middle East conflict, as well as inflation, rates, valuations and the overall susceptibility of the global economy. All asset classes have had a negative quarter, apart from global infrastructure, cash and gold. It’s worth noting, however, that gold, which peaked past US$5,500 in January, has since fallen below US$4,600, for that matter, so have all asset classes bar cash.

It’s therefore unlikely an investor in the yellow metal would feel like it’s been a positive quarter. Therein is the issue. We are all human, and we feel. Humans feel losses, much more than we feel gains. And we will try to avoid losses if we can. If this concept doesn’t resonate with you, we suggest reading Daniel Kahneman’s book Thinking, Fast and Slow.

There is no doubt that, coming into this crisis, equity market valuations were heady. Already, discerning investors had been paring gains in AI companies. A rotation had been observable, with the value factor outperforming growth in the second half of 2025.

This trend has continued through the quarter, spurred on by rising inflation, which typically coincides with periods when the value factor comes to the fore. Energy, staples and industrials have outperformed the growth sectors like information technology and consumer discretionary.

Investors will have to think slow because their feelings are moving fast. We are entering a new regime, and the market is undecided as to who the leaders and laggards will be. Stagflation appears as the base case, a Goldilocks scenario of low inflation and high growth is not on the cards, with the best case being an awkward middle in which growth is uneven and conviction is low. For the considered, opportunity could prevail through the next five years and will demand a different set of exposures than the last five.

“The biggest risk to investors is not the market, it is themselves.”
James Montier

Markets are playing Jenga

Jenga is one of those games that suck you in because it seems easy to start with: I have got this worked out, it’s fine. Until the anxious phase, when you realise it could all collapse at any moment with just one more support removed.

In the era of buy-the-dip and seemingly endless liquidity, markets have resembled the early part of a Jenga game. The question is: how many more supports can be pulled out?

Anxiety is rising, along with growth and inflation risks. Suspect liquidity pools and banking risks, and ongoing geopolitical tensions make for a formidable list of missing Jenga blocks. All this while the valuation tower is plenty tall, and getting increasingly wonky. It wasn’t that long ago (last year) when the main game in markets was assessing the economic environment. The boring part of Jenga.

This year, the US macro environment has been both the most straightforward part of the investing environment and far more stable than expected.

This has been thanks in large part to tariff policy first being TACO-ed (Trump Always Chickens Out) and then much of its remnants shredded by the US Supreme Court.

That’s not to say there haven’t been wild swings in quarterly growth driven by import front-loading, nor continuing upward pressure on inflation. Nor can it be taken for granted that President Trump won’t have another swing. The worst didn’t happen, and much of this, such as the front loading, was predictable.

What has happened is that the ICE crackdown has continued, undermining the labour force, particularly in construction, agriculture and some services, as well as consumer incomes. The combined result of tariffs and ICE has been sticky inflation well-above the Fed’s target, accompanied by a stagnating labour market – the annual jobs growth rate has slowed to pretty much zero. So far, the economy has managed to sputter along, as AI-driven investment has offset a tepid consumer and trade sector.

Markets have been able to ignore the flaccid economy, based on an assumption that a White House-friendly Fed will continue to look through above-target inflation and instead cut rates to bolster growth. This view has, so far, been only moderately impacted by the incipient oil price-driven negative supply shock.

The Strait of Hormuz piece

The longer the Iran involvement drags on, the higher the risk becomes that central banks feel forced to offset the negative supply shock. No central bank wants to re-live the 1970s oil shock-induced stagflation.

The risk that the Fed can’t or won’t ride to the economy’s rescue gets priced more heavily the longer the Iran “excursion” drags on. Another Jenga block removed? Straight macro risk overlaps heavily with fiscal risk, another mostly out-of-sight, out-of-mind problem, that’s starting to come more heavily into focus thanks to rising interest rates.

As of early 2026, the average interest rate paid on US Government debt was around 3.4%. Every new dollar of debt that has to be funded, and every dollar of existing debt that has to be rolled, will do so at an increasingly higher interest rate.

US Treasury has been shortening the duration of issuance to keep costs down but even 6-month T-bills are yielding 3.7% with 10-year bonds above 4.4%.

With debt held by the public at roughly 100% of GDP and rising sharply by the year, debt servicing risks becoming unsustainable. And besides all else, the US Supreme Court ruling has removed Trump’s fiscal fig leaf: the claim that tariff revenues would fix the ballooning budget and debt issues. Though we note that they wouldn’t even offset the One Big Beautiful Bill Act (OBBBA) let alone underlying problems.

The Congressional Budget Office’s (CBO) latest formal budget forecast for 2026, in February, was for a deficit of around US$1.9 trillion, or 5.8% of GDP. The US Supreme Court’s tariff block is estimated to remove US$1.6 trillion of revenue over 10 years, and subsequently increase debt funding costs by another US$400 billion. That’s a bit over another 0.5% of GDP added to the budget deficit each year, hence taking this year’s projection back up to 6.4% of GDP.

So far, the cost of Iran has been relatively modest, with best estimates at around US$40 billion so far, rising at US$1 billion a day. Troops on the ground would accelerate those costs. A long war would not be cheap. And that’s without adding the budget blow-out if the economy stumbles.

Trump campaign promises included the sorting out of debt and deficits. US debt to GDP previously peaked at 106.1% of GDP, after funding World War 2. On current CBO projections, that will easily be surpassed before 2030.

Uncertainties shake the tower

On top of the usual garden-variety macro risks, political uncertainty continues to grow. Markets have gotten used to trading headline to headline, often losing sight of the medium term. We think two factors have become noticeable in the political game. The first is known as “flood the zone” where the media cycle is filled with one distraction after another. The other is TACO, where Trump announces some hardline/out-there policy, then backs down when it lands badly (usually an equity market retreat).

Financial markets’ initial seemingly positive response to the outbreak of conflict in Iran was, we think, a combination of two factors: an assumption of a quick decapitation-style victory; and a belief that the US would TACO rather than get bogged down.

Unfortunately, there are limits to TACO, like when the Iranians decide they would rather close the Strait of Hormuz and dig in, rather than risk another attack in another few months. Geopolitics is getting harder.

Gung-ho adventurism and disregard for longstanding friends and alliances is also driving a more secular geopolitical splintering, as middle powers look to realign and alliances like BRICs become more assertive.

This will have long-term costs in terms of defence spending, in addition to trade relations, supply chain costs and redundancies. It also impacts long-term capital flows and foreign direct investment. These are not great times to be the world’s biggest debtor.

Political uncertainty has already surged. We don’t proclaim to be experts on war or global diplomacy. But if the Iran problem doesn’t straighten out, the impact of oil costs and availability will flow heavily into economies and politics, not least into US mid-term elections. A Democrat-controlled Congress or a disputed election outcome could add another layer to political mayhem.