Dorato News - April 2026

Portfolio Issues - Liquidity

In finance, liquidity means that you have access to your money quickly. Most of us don't think about liquidity until we need it.

Cash is liquid, unless it's locked in a vault and you've forgotten the combination. Stocks and bonds are liquid - you can turn them into cash quickly, at a relatively low cost.

You might think it odd that we like liquid investments if we're long-term investors. But we think you should have the ability to convert investments into cash easily. We don’t recommend liquidity for moving in and out of the market, we recommend it to have flexibility for changes in your individual situation.

Some form of alternative investments will likely be available in 401Ks soon. Proponents point to low correlation with the stock market and high returns as clear reasons to include them in your retirement portfolio. While those qualities certainly sound enticing, they come with some serious caveats.

Private credit, hedge funds, real estate- these are illiquid investments. Private credit especially has surged in popularity in recent years. However, some private credit funds are currently restricting withdrawals as investor skepticism mounts.

We think the negatives outweigh the positives for most illiquid investments. The beneficiaries tend to be the people selling or managing the funds, not the investors themselves.

“I appreciate that our cash is safe, but when do you think

you might remember the combination?”

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Market View - Perspective

Most of us like to think of ourselves as long-term investors. But when bad news starts to pile up, as it seems to be doing recently, we find our time horizon gets much shorter. So in times like these, with scary headlines, it can be helpful to pull back and take a look at what's happened in the past, to give us some perspective.

We've had several people tell us recently that the US stock market is getting clobbered. which made us look at the numbers. Since the end of February, the US stock market is down about 6%. Down, yes, but not what we would call clobbered. Covid clobbered the market - it dropped 35% in three weeks (and then made all of that back in the next six weeks). And the 2008-2009 recession clobbered the market, down 55% over 18 months. 6% seems pretty tame to us.

We are not implying that the market will suddenly turn upward from here. We have no way of knowing that. We just think it's useful to keep the ups and downs of the stock market in perspective. A 10% drop in the market is nothing unusual. According to the Hartford Funds, the US stock market has dropped 10% or more 20 times over the last 30 years. Not exactly a shocking event.

The US market's concentration is a risk. Everyone seems to own the big technology stocks. When those stocks drop, the US stock index drops, too, which is why we recommend diversification, and why we will continue to do so.

With the US-Israeli attack on Iran, and Iran's response, the price of oil is back over $100 a barrel. This also deserves some perspective. Even in just the last several years, oil has fluctuated between $25 and $150 per barrel.

Regardless of the price of oil, the US economy does seem to be under some stress. Anything to do with data centers is still booming, which is how the economy continues to grow at at 2-3% rate; but many companies that rely directly on consumer spending report that their customers are struggling.

Many of us are trying to figure out how artificial intelligence will affect the economy. It's anxiety-inducing to be told daily that you and most of the human race will be irrelevant soon. If we believe some technophiles, we'll all be lounging on couches and eating chocolates while computers and robots do all our work. That seems silly and unlikely to us. But we know that change is coming and that we humans will need to adapt. And we know that some businesses will wither away, as local newspapers did with the advent of the internet.

Since the end of February, US bond prices are also down a bit. Not as much as stocks, but still down. So bonds aren't exactly providing the diversification that we'd all like. The drop in price is probably due to the fear of inflation from a rising oil price, rather than from concerns about the national debt, which momentarily sits somewhere around $38 trillion. We think the national debt is the more important long-term factor in the price of bonds, but it can take a long time for the long term to show up. What governments, and not just the US, have done in the past, is try to cut spending and raise taxes. But those are politically unpopular, so they ultimately resort to inflation, as a less-confrontational way to shrink what they owe. We doubt the US government will be any different.

We think investors are behaving rationally in pushing stock prices down in the face of new information, as they have done in the past. We would not be surprised if prices continue to fluctuate as we all try to determine how lasting these changes are.

Sources: Economist, Wall Street Journal, Value Line, Vanguard, Applied Finance Group, Schwab