Setting up my portfolio for 2027 - Part 2

My portfolio management framework is simple yet flexible:

Themes → Picks → Risks → Hedges → Speculation

Every year, around this time, we refer back to our 8-step SWAT Sleep-Well-And-Tight investing process to adjust and pivot our portfolio towards the next 12-18 months…yes well in advance. This proactive strategy has enabled us to deliver market-leading returns which are posted here….an average annual return of +141% at a CAGR of +43%.

We plan for both right tail opportunities and left tail risks. We then identify the strongest investing themes and sectors for the next 12-18 months. And, we start allocating our cash towards those opportunities.

For example, for 2025-2026, AI was of course an important theme to pursue. However, we identified specific AI sub-sectors that would dominate this year along with a few other themes that almost no one was talking about. We bought stocks like ALAB and BE in the $30s and $40s and MRVL in the $70s and rode them higher for amazing multi-bagger gains.

We also mapped out what is likely to happen in each of the next 4-5 quarters starting in Q4 2025 and published how we planned to position our portfolio to maximize our returns in each of these 3-month time periods. As part of this rolling quarterly exercise, about a month ago, I laid out my Beachman plan for Q2 and Q3.

Now we are starting our portfolio pivot towards 2027.

Last week, I shared the top questions I am using to frame up this exercise. Today, we will sharpen our pencils on the macro forecast. Then we will discuss how I am re-organizing my SWAT portfolio for the next 12-18 months and the new themes that I want to invest in.

We have already started putting money to work in these new directions. Every earnings cycle, we get fresh business performance information on stocks that we own. It allows us to also find other stocks that meet our high bar for fundamental strength, growth potential and attractive valuation. My shopping list is ready and we recently added 4 new stocks to our portfolio….two of them in the last 2 weeks.

Welcome to Beachman AI’s Investing Whispers, where we invest in market-leading stocks and ETFs with Beachman’s proven long-term record and a lower risk approach. Over the past 6 years, our structured investing has delivered an average annual return of +141% at a CAGR of +43%.

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• Five strongest secular tailwinds in the US economy

• How will the macro landscape evolve?

• Beachman’s plan

• Re-organizing my portfolio

We go back to first principles to verify the strongest secular economic themes that will propel certain sectors higher over the next 12-18 months. A lot has changed since I last double checked this and it is important to invest in those leading themes. This helps me ensure that my SWAT portfolio is swimming in the same direction supported by those tailwinds.

Here are the top 5 strongest trends in the US economy:

After decades of essentially flat demand, US electricity consumption started accelerating hard in 2025, catching most utility planners off guard. As per Deloitte, peak demand is now projected to grow roughly +26% by 2035. Data center demand alone could hit 176 GW by 2035 — a fivefold jump from where we were in 2024.

The thing most investors still under-appreciate: power availability is the primary constraint on data center development. Grid interconnections are taking up to four years in some regions. And the pace of connecting new energy sources has consistently lagged behind the pace of new demand.

This is a multi-decade capital investment cycle. Every layer of the power stack benefits — transmission equipment, transformer manufacturers, natural gas turbines, backup power, grid software. Those with ready solutions are sold out for years and raising ASPs. However, if AI capex spend slows materially — either because ROI disappoints enterprise customers or because compute efficiency gains reduce power per model dramatically — the demand curve gets revised down hard.

US discretionary defense spending is expected to rise more than 17% in fiscal year 2026 to $1.05T. The FY2027 budget request is $1.5T total, representing a 28% increase in discretionary spending and a 44% increase for the Department of Defense.

There is new funding specifically for munitions — PATRIOT missiles, THAAD interceptors, drones, and solid rocket motors. There are deep production bottlenecks today because the US burned through years of inventory in months supporting Ukraine and now Iran operations. The Pentagon estimates it would take 3-4 years to restock munitions inventories.

Multi-year contracts are being negotiated and signed for solid rocket motors, propellants, guidance chips, advanced composites. However, the biggest risk is budget approvals and bureaucratic reviews.

I’m deliberately separating this from the AI power theme (#1 above) because they are each at two different stages of their cycle. Here there is more uncertainty but also more potential upside. Here’s why…

Gartner predicts up to 40% of enterprise applications will include integrated AI agents by the end of 2026, up from less than 5% in 2025. Deloitte projects the agentic AI market growing at a 53% CAGR, from $8.5B in 2026 to $45B by 2030.

Enterprise software companies are moving from seat-based pricing to outcome-based and usage-based pricing. For the best-positioned platforms, this is an ASP expansion opportunity within a pricing model change as measured by RPO growth, dollar based net retention.

Companies with deeply embedded workflow software — where an agent doesn’t replace the software but extends it — capture the most durable pricing power. e.g. workflow, ERP, CRM, security. The switching cost is already high. Add an agentic layer on top and the switching cost about doubles. However, foundation AI models could compress margins at the application layer. If any developer can wire an agent into any workflow for near-zero cost, the platforms lose the pricing advantage they’re counting on. The companies most at risk are “AI-washed” traditional SaaS that bolt on an LLM call and market it as transformation. The stocks that win are the ones with proprietary data and workflow lock-in that the agent actually needs to function.

The US is now the world’s largest oil, natural gas and LNG producer and exporter. And the ME war has caused immense damage to energy infrastructure in that region which is estimated to take up to 5 years to fully get back online. This has further increased demand for US energy especially natural gas and LNG.

Today, Qatar represents roughly 20% of global LNG supply and the US is the only country with the flexible export infrastructure to meaningfully fill it near-term. European LNG imports increased 30% in 2025 and are expected to grow higher in 2026 as the EU is planning to fully phase out Russian gas by Fall 2027.

The domestic demand angle is equally important. More than $35B is expected to be spent through 2027 on US natural gas pipeline and infrastructure alone, representing roughly 7,500 miles of new pipeline capacity…most of this based on new electric grid and AI data center needs.

This is the slowest moving of the five but the most durable. By early 2026, Americans aged 65 and older account for about 19% of the total population, up sharply from 12% in 2004. All baby boomers will be older than 65 by 2030 — roughly one in five US residents. Americans age 55 and older account for 57% of total healthcare spending. Healthcare inflation is running at 4% as of early 2026. Medicare spending is projected to grow 10% annually until 2030. Federal healthcare expenditures could climb from $2.4T in 2024 to $4.3T by 2033.

As the 80+ population grows, demand will shift from episodic hospital care to chronic condition management and home monitoring. i.e. wearables, remote diagnostics, home infusion — recurring revenue models with a captive and growing patient base. As AI diagnostic layers get embedded into these devices, the ASP per patient goes up and the switching cost increases.

While there are several US sectors performing well today, these are the 5 strongest themes with the most upside over the next 12-18 months. These are what I want to consider for my SWAT portfolio.

In early May, I shared my forecast for Q2 and Q3. Here is a handy link to that post.

Many of the items in my bear case are playing out as expected…higher inflation, higher LT rates, possible Fed rate hikes (no more cuts) and increasing talk about stagflation setting in. Historically, periods of lower consumer sentiment and rising inflation expectations have coincided with higher bond yields, increased equity market volatility, and pressure on valuation multiples…aka stocks prices drop.

Even though the ME war is settling down, supply chains and related bottle necks will take months to clear up. Damage to energy infrastructure in the ME will take years to repair and fully bring online.

Market consensus is growing that the Fed is 1-2 rate hikes behind the curve. I am never one to double guess the FOMC, however given the frothiness in the markets for the past 15 months, I am inclined to agree. There is just too much liquidity chasing too few stocks.

On the bull side, with the mid-term elections coming up in Nov, the US admin will turn on the fiscal liquidity and stimulus pump. The 2025 OBBB funding is already hitting the economy in terms of lower tax deductions, larger tax refunds, small business stimuli etc. The Trump admin has some more tricks up their sleeves to keep juicing the markets and there is no sense in fighting this trend while it lasts.

The Feds will hold rates steady with perhaps 1 token rate hike this year. US Ttreasury will do yield control. Fed driven QE will restart. They will keep LT rates low in the 4%. traders will borrow at 4% and then they will invest that capital in anything that generates more than 4% i.e. stocks, options, momemtum, leveraged ETFs.

Here is what I expect for the rest of Q2 and Q3:

• Markets will slowly bleed sideways with small spurts higher and larger dips lower.

• Volume will stay anemic, especially as we get into the peak Summer months.

• CTAs and options trading will control market movements…not fundamentals.

• We will get a meaningful pullback. The SP500 will drop back lower into the 6800-6500 range. The Nasdaq will drop even lower as a % when all that FOMO froth gets burned away.

• Oil and commodities will drop in price yet remain expensive.

• Inflation will be persistently higher.

• The Trump admin’s attempts to control the narrative and manipulate markets will become less and less effective.

• Earnings forecasts, especially for consumer sectors, will be revised lower.

• AI capex spend fears will rise as the token costs increase; enterprises will focus on AI spend optimization and AI providers will drop prices.

Looking further out into Q4 and 2027…things are a lot more dependent on how the US mid term elections play out. The US economy is heavily dependent on the continuation of AI capex spend in the billions and trillions. Any hiccup in AI will cause a stronger market correction given all the other macro red and yellow flags.

If there is a deeper market correction, the US admin will use that “crisis” to justify the setup of a new sovereign fund to invest in US stocks. They will lean into more QE and new stimulus, irrespective of which political party controls Congress next year. We will cross that bridge when we get there.

Now, given this macro horoscope, here is my overall Beachman portfolio plan…

My overall plan…