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FBB Capital Partners 2nd Quarter Newsletter, 2026: Is AI the New Oil?
As we celebrate the 250th anniversary of our country’s founding, we remember the companies and generations of workers upon whose backs the world’s largest economy was built, while also looking forward to where and how our country will continue to grow. Midway through 2026, investors are grappling with economic forces that reflect America’s past and present. Oil has been in the spotlight this year, alongside a new technology that could change our world in ways yet to be understood: Artificial Intelligence, also known as “AI.” Significant economic and market changes we’ve seen this quarter lead us to wonder, Is AI the new oil?
During the second quarter, rapid swings in Middle East geopolitics pushed oil prices higher—then back down as quickly as they rose, while the AI buildout continued to power ahead. This quarterly letter will focus on short-cycle changes underway in energy and inflation, the longer-cycle evolution of AI, and implications for markets and portfolio positioning.
Cooling tensions and falling commodity prices
The security situation in the Middle East has shifted rapidly this year but many investors now expect a gradual de-escalation to continue, which should increase the flow of oil moving through the Persian Gulf. That expectation has driven oil prices down from a high of over $110 a barrel in early April to approximately $70 by the end of June—in line with prices last summer. While the worst of the conflict and the oil price spike appear to be behind us, we continue to watch for developments that could reverse this favorable trend.
Although oil prices have retreated, the temporary spike in prices this spring is still working its way through the economy and markets, as seen in the latest 4% inflation data that also included changes in food and energy prices. Elevated home prices, a bull market in stocks, and low unemployment have helped consumers maintain resilience in the face of higher gas prices. However, we’re seeing some “belt-tightening” including more swaps for lower-cost goods and reduced spending within discretionary categories such as dining.
Bond market yields suggest that inflation will linger, as seen in a modest rise in Treasury yields since the Iran conflict began. While higher bond yields may be attractive to some extent for retirees, elevated inflation reduces some of that appeal. Still, if inflation fades as we currently expect, locking in today’s yields should support portfolio performance.
Speaking of interest rates, incoming Fed Chair Kevin Warsh has already made taming inflation his top priority. Fortunately, Warsh takes over at a time when the job market is in fairly good shape, allowing the Fed to focus on avoiding the out-of-control inflation that dogged Warsh’s predecessor Jay Powell in the years just after the Covid pandemic. Warsh’s challenge will be to cool the economy and inflation through interest rate hikes without triggering a wave of layoffs or a recession.
AI: A new growth engine
While the Fed focuses on relatively short-term dynamics with inflation, the technology sector continues to invest heavily in a multi-year AI buildout. Mega-cap cloud computing companies are spending hundreds of billions of dollars on data centers and semiconductors that power AI models such as Chat GPT, Google Gemini, and Anthropic’s Claude.
We continue to hear about excess demand for AI tools along with supply constraints for energy, data centers, and hardware, suggesting that the AI buildout may still have room to run.
Rapidly changing dynamics for tech and energy sectors were on display in the first half of 2026. As the Iran conflict worsened in the first quarter, oil prices and energy stocks surged ahead of the broader market, while AI and tech stocks stumbled on a more “risk-off” tone. That trend fully reversed in the second quarter, as de-escalation pushed oil prices and energy shares lower and AI-driven demand for semiconductors boosted tech shares. As we wrestle with the AI growth opportunity, we are seeing massive AI-related IPOs, including a record-setting offering from SpaceX, which has a long-term plan to put AI data centers in orbit. Additional stock offerings from Anthropic and OpenAI later this year could offer further tests of investor sentiment.
Positioning and market outlook
Beyond AI headlines, corporate profit growth has broadened across most sectors. We expect profits to grow in the mid to high teens over the 2025-2027 timeframe, suggesting that continued upside is possible after a 10% gain in the broader market during the first half of the year. A broadening out of profit growth may be supporting favorable performance across a wide range of companies and geographies, including US small cap, international developed, and emerging markets. Notably, one of the better performers in the emerging markets index is Taiwan Semiconductor, which we view as a compelling way to own the global AI build-out.
We continue to favor a “fully invested” approach across equities and bonds—meaning, that we prefer owning a full allocation to both asset classes. Our sense is de-escalation in the Middle East, modest Fed pressure on inflation, and steady profit growth may support equities, and we continue to favor equity investment within the United States where we have observed profits continuing to grow faster than in most other regions. For bonds, we view rising U.S. yields favorably for bond acquisitions. We continue to rebalance into bonds as equities march higher.
Short-term reversals of fortune for energy and tech stocks this quarter led us to question whether AI is the new oil. The massive investment in AI, coupled with the recent surge in market value for AI-related companies, suggests that AI could become even more essential to economic growth than commodities such as oil. However, as these industry transitions continue, we remain committed to diversifying across sectors and asset classes as a way of balancing risk and return. We continue to favor fully invested portfolios of high-quality companies with durable growth as a way to compound wealth, ever mindful of your long-term goals and objectives.
We wish you all the best this summer.
Michael Bailey, CFA
Director of Research
Jane DeLashmutt O’Mara, CFP®
Senior Portfolio Manager
Women & Finance: Alphabet Soup – Wealth Planning Opportunities for Retirees Using IRAs
It’s been a month since Tax Day, and I’m still thinking about taxes.
While some taxpayers may have received tax refunds with the filing of their returns, many others may have had to stroke one check to pay tax liability—and another for estimated taxes.
With both federal tax liabilities and the first quarter estimated tax payments due April 15 each year, taxpayers barely have time to catch a breath before making second quarter payments just 60 days later on June 15.
This blog post will review potential strategies to minimize or alleviate the need to pay estimated taxes using Required Minimum Distributions in coordination with Qualified Charitable Distributions.
Please keep in mind that these strategies may not be appropriate for everyone. Prior to making any changes to your own tax planning, we recommend that you discuss your individual circumstances with your CPA as well as your Portfolio Manager at FBB Capital Partners.
Using RMDs to Satisfy Estimated Tax Payments
By the time you celebrate your 70th birthday, there are few age-based milestones remaining. From a financial planning perspective, there is one more important birthday: Retirees ages 73 and above (75 for those born 1960 and later) are required to begin taking distributions from retirement accounts. These distributions are also referred to as Required Minimum Distributions or RMDs.
Required Minimum Distributions are required regardless of whether one wants or needs the funds for lifestyle spending, and they are taxed as ordinary income in the year in which they are taken. The required amount grows larger with each passing birthday. This may compound a retiree’s expenses as the additional taxable income resulting from RMDs may trigger higher Medicare premiums, higher taxes, and other downstream tax calculations tied to Adjusted Gross Income (AGI) thresholds.
If you are subject to paying estimated taxes, you might consider using RMDs to help meet your tax payment obligations in lieu of making quarterly estimated payments. This strategy may help simplify cash flow, reduce administrative friction, and potentially minimize underpayment exposure.
Unlike quarterly estimated tax payments, which are credited when the tax payments are paid, taxes withheld from IRA distributions are generally treated as though they were paid evenly throughout the year — regardless of when the withholding occurs. This may create a meaningful and often overlooked planning opportunity for taxpayers.
As taxpayers approach year-end, quarterly estimated payments made earlier in the year may no longer align with final tax liability projections. This strategy may be helpful in some of the following circumstances:
- Those with complex income streams or liquidity events resulting from private equity distributions, concentrated stock sales, K-1 income, or deferred compensation.
- Taxpayers facing underpayment penalties.
- Taxpayers utilizing a ROTH conversion strategy.
- Taxpayers facing capital gains distributions, higher than anticipated capital gains, or an unexpected windfall.
Rather than sourcing liquidity from taxable portfolios, clients may be able to increase withholding or even allocate the entire Required Minimum Distribution to pay both federal and state income taxes. Alternatively, cash may need to be generated from the sale of appreciated securities within a brokerage account, which would trigger additional taxes. Again, speak with your FBB Capital Partners Portfolio Manager and your tax preparer to confirm whether this strategy is right for you.
Integrating Qualified Charitable Distributions (QCDs)
Qualified Charitable Distributions (QCDs) may present an important companion strategy to the above. It used to be that retirees would begin taking RMDs at age 70½. That changed under the SECURE 2.0 Act, which called for increasing the age for RMDs to 73 years old (RMD age will shift again to 75 years old beginning in 2033). However, the legislation retained the minimum age for eligibility to make Qualified Charitable Distributions.
Strategic planning may help to transform RMDs from a tax burden into a meaningful philanthropic and cash flow tool. For charitably inclined individuals ages 70½ and above,
Taxpayers may fulfill RMDs from IRAs by making direct transfers from their IRA accounts to charity (up to $111,000 in 2026). The “QCD” is not tax deductible. However, if executed properly, the distribution may be excluded as ordinary income and will also meet a taxpayers Required Minimum Distribution.
For those ages 73 and above who are subject to RMDs, using QCDs to make charitable contributions may lower downstream tax calculations tied to Adjusted Gross Income (AGI) thresholds. For high-income retirees, that AGI reduction may be more valuable than a standard charitable deduction.
Final Thoughts
For wealthy retirees, RMDs may be unavoidable. However, when coordinated thoughtfully, RMDs may offer an opportunity to more efficiently manage estimated tax obligations and charitable giving, improving cash flow flexibility, and reducing administrative burden.
About the Author: Jane Delashmutt O’Mara, CFP®
Jane brings more than a decade of experience working in financial services to her practice. Her financial planning advice has been featured in various radio and news outlets including Marketplace, CNBC, The Street, Market Watch, USA Today, and U.S. News & World Report. Jane is a Certified Financial Planner® practitioner and is a member of the National Association of Personal Financial Advisors. Jane believes that client education and compassion are vital to the financial planning process. Whether she’s working with a client to plan for retirement or navigate a major milestone such as marriage, divorce, or loss of a loved one, she enjoys educating and empowering her clients. Jane also enjoys working with families with unique or complex estate planning needs. Prior to joining FBB Capital Partners, Jane held various roles in commercial real estate finance, banking, and brokerage industries. Jane is a graduate of St. Mary’s College of Maryland and holds a master’s degree from New York University where she studied community development and real estate finance. As an undergraduate, Jane was an All-American sailor, helping her team to several national titles. Jane and her husband GK live in Oxford, Maryland with their two children.
*Please Note Limitations: The recognition by publications or media should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results or satisfaction if FBB is engaged, or continues to be engaged, to provide investment advisory services.
Important Disclosures
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by FBB Capital Partners [“FBB]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from FBB. FBB is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the FBB’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.fbbcap.com. Please Remember: If you are a FBB client, please contact FBB, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian. Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your FBB account holdings correspond directly to any comparative indices or categories.
Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your FBB accounts; and, (3) a description of each comparative benchmark/index is available upon request.
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