Fire Horse

Author

Pete Tan
February 19, 2026

Happy Chinese New Year! As we enter the Year of the Fire Horse, the "fire" is already spreading across geopolitics, central bank policy, and the tech sector. Here is a breakdown of the current landscape and how you should consider positioning your portfolio:

1. Geopolitical Tension: US-Iran Escalation

The threat of military strikes on Iran has shifted from rhetoric to a credible "kinetic" risk.

  • The Situation: Reports indicate a significant buildup of US military assets in the Gulf, with some analysts placing a 90% probability on imminent strikes.

  • Market Impact: Oil prices have already spiked toward $70 per barrel, with tail-risk scenarios projecting $100+ if the Strait of Hormuz is disrupted. This creates a "stagflationary" threat: higher inflation combined with slower global growth.

  • Investor Reaction:

    • Hedge with Energy and Gold: Use energy stocks or commodities to offset potential fuel-driven inflation. Gold remains the primary "safe haven" for geopolitical shocks.

    • Flight to Quality: Expect volatility in equities. Consider moving toward defensive sectors (Utilities, Healthcare) or high-quality US large caps that can weather a temporary risk-off sentiment.

2. Monetary Policy: The Fed’s Great Divide

The latest FOMC minutes reveal a central bank deeply split, shattering the consensus of a smooth "glide path" for rate cuts.

  • The Situation: While many still expect cuts in 2026, a hawkish camp is now advocating for potential rate hikes to combat sticky inflation and strong GDP growth (currently tracking at 2.5% to 4.3%).

  • Market Impact: The "easy money" narrative is being tested. Bond yield curves are steepening, and the 10-year Treasury is hovering in the 4.0% to 4.25% range.

  • Investor Reaction:

    • Shorten Duration: In an environment where hikes are back on the table, long-dated bonds are vulnerable. Focus on short-to-intermediate term fixed income.

    • Review Cash Allocations: If the Fed holds rates higher for longer, cash yields remain attractive, but be ready to deploy if a "hawkish shock" creates a better entry point for equities.

3. The AI Arms Race: $650 Billion in Capex

Meta’s massive commitment to Nvidia chips underscores a broader trend: hyperscalers are spending more than the GDP of most countries to build the AI "fabric" of the future.

  • The Situation: Meta, Amazon, and Alphabet are on track to spend over $600 billion this year alone. Meta’s deal for millions of Nvidia’s next-gen "Rubin" chips suggests they are prioritizing speed over their own in-house silicon efforts.

  • Market Impact: This reinforces Nvidia's 90% market dominance and provides a massive revenue tailwind for the entire semiconductor supply chain (TSMC, Broadcom, Applied Materials).

  • Investor Reaction:

    • Infrastructure over Apps: For now, the "picks and shovels" (Nvidia, TSMC) remain the clearest winners.

    • Monitor Meta’s Margins: For Meta investors, the trade-off is high: massive capex could compress margins. Watch for "Agentic AI" product launches as proof that this spending is generating a return on investment (ROI).

As the interest continues to fall, many investors are turning their focus on income and dividend investing. And the main reason I created a new course - Dividend Market Genius and I am putting the finishing touches.

I’ll be sharing more about this during an upcoming webinar, but if you want to be at the front of the line when we launch, you should join the waitlist now. Waitlist members will get early access, exclusive "pre-launch" insights, and a special discount that won't be available to the general public.

Happy Hunting!

Pete
Invest with Pete

🚨‼️ By the way, I’ll never PM anyone on telegram or any other social media platforms. If you receive any “Pete” messaging you, these are scammers impersonating me. Pls beware!

The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.