FEB 2026: Running Money - Market Pain — Western Level Advisors

It’s rough out there.

The Trump era does not disappoint. Volatility is high. Stock dispersion is high (gainers vs losers). If you’re holding on to the belief that the equity leaders of the past 5, 10, 20 years will continue to lead – you might want to re-think that. I’m not saying the MAG7 names will be losers, but there are numerous sectors / asset classes outperforming MAG7 by a tremendous margin since Trump took office. Recent examples include all the metals and miners, energy, consumer staples, defense / aerospace, emerging markets, and non US developed equity are all categories well ahead of the S&P 500 and MAG7 in the last year.

Market Rotation vs Risk Off.

Managing the Trump factor isn’t enough. We’re entering the AI era as well - at light speed - all gas - no brakes. In the last few weeks, the market decided to acknowledge we are facing an AI disruption “event horizon”. Software stocks have been completely decimated – if you are unaware of this – consider yourself warned. Somewhere amidst all the AI hype is a future that is a very different world versus how systems operate at present. Even the conservative AI predictions represent an enormous magnitude of change.

All that AI compute is incredibly energy dependent….so the backdrop of Trump/Tariffs breaking up low cost trade has sent the metals, basic materials, industrials and energy sectors higher – by a lot.

So far this has been a rotation event, not a risk off event.

WLA Positioning.

In my last market update (https://westernlevel.com/commentary/october-2025-portfolio-update) I reviewed many portfolio exposures across the firm’s client book with generic YTD performance figures. Since October 2025, WLA’s portfolio has continued to deliver. For the US Equity silo the value bias and use of equal weight ETFs has been spot on. For the Satellite portfolio, Energy, Gold, MLPs, Dividend Equity, Utilities and Uranium…have all contributed nicely.

While it is good to see the overall portfolio ahead of the S&P 500 YTD for 2026 – I also see the one or two ideas I didn’t act on from my short list. Ideas that moved faster than I expected…and that tends to be the theme right now. Many of these sectors or asset classes leading the market in 2026 are quite small relative to the SPY / MAG7 complex…and when money rotates out of MAG7 into much smaller asset pools it can be explosive to the upside.

The Charts:‍ ‍

YTD stock performance dispersion is wide for such a short period:

Dispersion again (Software Sector versus Energy Sector YTD. Wow.

WLA US Equity ETF portfolio examples, performance year-to-date through FEB 25, 2026:

SPY, up 1.5% (S&P 500)

OEF, down 1.0% (S&P 100)

EQWL, up 3.0% (S&P 100 Equal Weight)

IWX, up 6.1% (Russell Top 200 Value)

RSP, up 6.0% (S&P 500 Equal Weight)

WLA Satellite ETF portfolio examples, performance year-to-date through FEB 25, 2026:

XLU, up 10.6 % (Utilities)

AMLP, up 9.0% (MLPs)

XLE, up 21.9% (Energy)

IDV, up 13.4%% (International Dividend)

SCHD, up 14.5% (US Dividend)

PHYS, up 20.2% (Gold)

SRUUF, up 9.0% (Uranium)

Above performance figures are NAV price only, excludes income/distributions.
Performance figures are illustrative only, they do not reflect WLA’s fees.
Not investment advice, read the disclosures.

WLA Portfolio Summary:‍ ‍

The S&P 500 mega cap (MAG7) concentration risks have been realized on limited basis. Flat S&P 500 performance is hiding real pain in a few sectors like software.
The WLA Satellite Portfolio is working well - WLA has assembled attractive total return exposure with reduced correlation to MAG7.
WLA’s client portfolios for 2026 are on target. New allocations YTD in 2026 include an actively managed, concentrated small cap value mutual fund and a concentrated emerging market ETF.

Best,
Jon

--------- Not investment advice. Performance figures are sourced from the following ETF links. Above performance figures are not representative of WLA client results, WLA client performance is based on different time periods among other factors. Actual client performance varies based on multiple factors including risk tolerance, when WLA was hired and when positions were established and the deduction of WLA ‘s management fees. WLA client holding period for the above examples varies, do not assume it’s the year to date period for any of the examples provided, it may be longer or shorter. Do not assume every WLA client holds every ETF example, client risk tolerance and when WLA was hired effects portfolio allocations. Read the disclosures on the ETF links provided. Performance listed is for illustration purposes only, not an endorsement to buy or sell. Do you own research and/or discuss with a professional investment advisor. Read full disclosures located in this email and at www.westernlevel.com.

https://www.ssga.com/us/en/intermediary/etfs/state-street-spdr-sp-500-etf-trust-spy‍ ‍

https://www.ishares.com/us/products/239723/ishares-sp-100-etf‍ ‍

https://www.invesco.com/us/en/financial-products/etfs/invesco-sp-100-equal-weight-etf.html‍ ‍

https://www.ishares.com/us/products/239722/ishares-russell-top-200-value-etf

https://www.ishares.com/us/products/239771/ishares-north-american-techsoftware-etf‍ ‍

https://www.invesco.com/us/en/financial-products/etfs/invesco-sp-500-equal-weight-etf.html‍ ‍

https://www.schwabassetmanagement.com/products/schd‍ ‍

https://www.ssga.com/us/en/intermediary/etfs/state-street-energy-select-sector-spdr-etf-xle‍ ‍

https://www.alpsfunds.com/exchange-traded-funds/amlp‍ ‍

https://www.ssga.com/us/en/intermediary/etfs/state-street-utilities-select-sector-spdr-etf-xlu \‍ ‍

https://www.ishares.com/us/products/239499/ishares-international-select-dividend-etf‍ ‍

https://sprott.com/investment-strategies/exchange-listed-products/physical-bullion-funds/gold/‍ ‍