Ceasefire, Confidence, and Cutting What Isn't Working

Saturday morning. Markets are closed, the coffee is strong, and I've got the kind of clarity that only comes from stepping away from the screens for a few hours. If you read yesterday's Week in Review: Ceasefire Relief, Sticky Inflation, and 10 Lessons From Our Portfolio, you already know this was a week worth digesting slowly. Today I want to go deeper on the strategic question I keep circling back to: when do you hold a losing position, and when do you admit you were wrong?

Because right now, our portfolio has some positions that are working beautifully and others that are teaching us expensive lessons. Let's talk about both.

The Week in 30 Seconds

The U.S.-Iran ceasefire held through the week, pulling the VIX down to 19.23 and reopening the conversation about potential Fed rate cuts later this year. But it's a fragile peace. Headlines this weekend emphasize there's no clear path to a lasting agreement, and VP Vance is heading to Pakistan for another round of talks that could shift the geopolitical landscape in either direction. Meanwhile, Israel rejected a ceasefire with Hezbollah ahead of Lebanon talks next week, a reminder that Middle East risk hasn't vanished. It has merely changed shape.

On the macro front, inflation remains sticky at 3% on the Fed's preferred gauge, and private-sector hiring came in at 62,000 in March (better than expected per ADP). That creates an interesting tension: the labor market is softening but not collapsing, inflation is elevated but not accelerating, and the ceasefire is easing the oil-driven price pressures that were the Fed's biggest wildcard. Markets are resolving that tension by leaning toward optimism , "maybe a cut later this year" beats "definitely not". And one analyst noted that $4-a-gallon gas prices, counterintuitively, won't trigger Fed rate hikes and could actually accelerate cuts if energy-driven inflation proves transitory.

Friday's price action told the story in miniature. The Nasdaq gained 0.35%, but the S&P 500 slipped 0.11% and the Dow fell 0.56%. Small caps (Russell 2000) dropped 0.22%. That divergence is the key signal: this is a tech-and-growth-led market, not a broad-based rally. Only the growth-heavy corners of the market are getting rewarded. Asian markets had a genuinely strong week. The Nikkei surged 1.84%, the KOSPI gained 1.40%, and Taiwan's TAIEX rose 1.60%. Headlines comparing the Iran oil shock to the 1997 Asian Financial Crisis appear overblown; Asian markets are shrugging off the comparison and rallying on their own structural strengths.

The S&P 500 Information Technology sector gained 0.76% on Friday, while energy and healthcare were the weakest U.S. sectors. That pattern. Tech and growth leading while energy fades. Has been the story for weeks now. And it's the pattern that should be driving our portfolio decisions.

The Macro Chain, Spelled Out

Before we get into positions, let me connect the dots explicitly, because this is the framework for everything that follows:

Ceasefire holds → oil's geopolitical risk premium fades → eases inflation fears at the margin → revives rate-cut expectations → supports duration-sensitive growth stocks (tech, software) → pressures crowded energy trades.

If you understand that chain, the rest of this post writes itself. Our winners are on the right side of it. Our losers are on the wrong side. And the key risk. The thing that could reverse the entire sequence. Is the ceasefire breaking down.

Here's my simple framework going forward: if the ceasefire holds, inflation stays sticky but manageable, and labor softens gradually, favor quality growth and broad beta. If talks break down, rotate back toward energy and defensives. Every portfolio decision we make next week should be filtered through that lens.

The Positions That Are Working

Let me start with what's going right, because it actually reinforces the strategic lesson.

TSM (Taiwan Semiconductor) is our best performer at +10.76% from entry. The AI chip demand thesis remains intact, and Taiwan's broader TAIEX index gained 1.60% on Friday alone. When we entered this position, some readers questioned the geopolitical risk of owning a Taiwanese chipmaker during a period of Middle East conflict. The logic was simple: semiconductor demand is structural, not cyclical, and Asian markets are proving resilient despite Iran-related anxiety. So far, that's proving correct.

ETH-USD (Ethereum) is up 8.63% from entry. The ceasefire-driven reduction in broad market anxiety has rekindled risk-on sentiment, and crypto is a direct beneficiary. This is a high-risk position by design, and I'm watching it closely, but the momentum has been in our favor.

BAC (Bank of America) is up 6.40%. We entered this because we had zero financials exposure, which was a blind spot. The steepening yield curve thesis is playing out. The 10-year yield sits at 4.32% while shorter-duration rates are lower, which is exactly the environment where bank net interest margins expand. Financials did pull back on Friday, which is normal profit-taking after a strong week. Nothing that changes the thesis.

SPY, our core beta anchor, is up 3.60% from entry. I wrote about this in our compound interest piece, and the reasoning was blunt: we were trailing the S&P 500 by over 2.6 percentage points because we lacked basic market exposure. Adding SPY was about closing that gap. It's doing exactly what it's supposed to do. Friday's modest -0.07% dip reflects the narrow leadership. The broad index treading water while tech does the heavy lifting.

MRK (Merck) is modestly positive at +0.46%. Healthcare had a rough Friday, and Merck holding near entry is actually decent relative performance. The defensive thesis here is about ballast, not fireworks. At a forward P/E of roughly 12x, Merck remains attractively valued among large-cap healthcare names. Though I'll be watching sector rotation closely if rate-cut expectations firm up, since defensive sectors often underperform in risk-on regimes.

BABA (Alibaba) is up 1.32% from entry. I need to be honest about this one, and I will be in a moment.

The Positions That Aren't Working

Here's where the strategic conversation gets real.

ADBE (Adobe) is down 7.11% from our entry. The AI transformation story remains compelling on paper. But "cheap" can get cheaper, and the market is telling us something by letting Adobe lag even as the broader tech sector leads. I'm still within my 12-month horizon on this one, so I'm holding, but I'm watching closely. If tech continues to lead and ADBE doesn't participate, that tells us the market disagrees with our thesis. And the market gets a vote.

COP (ConocoPhillips) is down 6.95%. And XLE (Energy Select Sector SPDR) is down 6.93%. This is the one I really need to address.

We have two energy positions that are essentially making the same bet. When oil prices were climbing on geopolitical risk, doubling down on energy felt reasonable. But the ceasefire changed the calculus. And here's the cause-and-effect chain that's hurting us: ceasefire stabilizes → oil's war premium fades → energy sector sells off → our doubled-up energy exposure amplifies the loss. One headline this week captured it perfectly: "Why $4 a gallon gas prices won't trigger Fed interest rate hikes. And could lead to cuts." If even elevated gas prices aren't enough to keep the Fed hawkish, the bullish case for energy gets harder to sustain.

Our own internal review flagged this overlap weeks ago. The recommendation was clear: cut XLE, keep COP if the thesis reconfirms within days, and redeploy into areas where the market is actually rewarding investors. Why didn't I act? Honestly, it was anchoring bias. I kept waiting for one more bounce in oil to exit at a better price, and that bounce never came. That's a classic mistake, and naming it is the first step toward not repeating it. The delay has cost us, plain and simple.

MSFT (Microsoft) is down 0.69% from entry. Tiny move, and I'm not remotely concerned. Microsoft's fundamentals. Strong margins, robust earnings growth driven by Azure and AI. Are exceptional. Tech led the market this week, with the S&P 500 IT sector gaining 0.76% on Friday. MSFT trading well below its recent highs while posting those kinds of numbers is exactly the disconnect we're trying to exploit. This is a patience play, and the macro environment (risk-on, growth-favoring) is on our side.

The Honest Conversation About BABA

Alibaba is up 1.32% from entry, which sounds fine until you consider it's a high-risk position that we entered with below-threshold confidence. Our own rules say no position should enter the book below 0.55 confidence. BABA was 0.48. I broke my own rule, and while the position is slightly positive, the Chinese consumer recovery thesis has not materialized in any meaningful way.

Shanghai's index gained 0.51% on Friday and Hong Kong's Hang Seng rose 0.55%, but scattered green days don't validate a macro thesis. I'm keeping BABA on a short leash. If the next few weeks don't show progress on the underlying story, I'll cut it and put the capital somewhere more productive.

The Real Lesson: Discipline Beats Conviction

Here's what this week crystallized for me. Our winners. TSM, ETH, BAC, SPY. All share something in common: they're aligned with what the market is actually doing. Growth is leading. Risk-on is the regime. Beta matters. The macro chain from ceasefire to rate-cut hopes to growth outperformance is carrying these names higher.

Our losers share a different trait: they were conviction calls that went against the prevailing current. Energy doubled up when oil had momentum. BABA was a contrarian bet on China. Neither is necessarily wrong forever, but position sizing and overlap discipline would have limited the damage.

There's a deeper force at work here, too. One of this week's more thoughtful market pieces argued that the big macro force driving stocks higher for years has been the persistent flow of capital into passive and systematic strategies. A structural bid that rewards market beta and punishes contrarian bets that fight the flow. That's exactly what our portfolio is experiencing. The positions aligned with the flow are working. The ones fighting it aren't.

Next Week: What I'm Watching and What I'm Doing

So next week, I'm planning to act on what we've been saying:

The March jobs report hits Friday, and it will be the most important data point of the week. ADP's private-sector number (62,000) gives us a decent baseline, but the official BLS report could surprise in either direction. A soft number would reinforce rate-cut hopes and likely extend the growth/tech rally. A hot number could stall the whole narrative.

Beyond that, I'm watching the ceasefire above all else. VP Vance's peace talks in Pakistan are the highest-stakes geopolitical event on the calendar. A breakthrough would further compress oil's risk premium and cement the growth-over-energy rotation. A breakdown would send oil right back up and potentially flip the entire playbook.

That answer. Ceasefire stability or breakdown. Determines whether COP stays or goes, and whether this growth-led regime has legs or is living on borrowed time.

Enjoy your weekend. We'll be ready on Monday.

This content is for educational and informational purposes only. It does not constitute financial advice. Always consult a qualified financial advisor before making investment decisions. Past performance does not guarantee future results.