Glad I was Misguided.… Still Feel the Same
April 18, 2026
If I were to begin this note by saying I am speechless, I can hear all the wags out there – Richard Newman speechless? That’s a surprise. And that would line up perfectly with what happened in the markets this week because it was very surprising. Despite the ongoing war, surging energy prices, naval blockades, actual fighting in Lebanon, and imminent shortages of critical materials (jet fuels, fertilizer, helium, aluminum ) the markets surged higher. I felt completely crossed up.
I had warned of potentially difficult times ahead for investors. Not advocating selling, just patience and judiciousness in deploying additional capital. But patience wasn’t a virtue this week. Buying into the recent market dip was a better strategy than sitting on capital in money market funds as I had suggested. Like other investors and advisors, I have enjoyed and benefitted from this week’s rising prices. That said, I feel caution is warranted even more now than before... I just think momentum has carried the market too far.
All week I have been trying to understand the riotously positive market action. Some things were obvious – repeated pronouncements by Trump and others that the situation would resolve soon, imminently even, created optimism and an immediate decline in oil prices. It is also likely that many investors who shared my pessimism and had invested in ways that would profit from market declines had to reverse those bets - their buying also boosted the market. And major tech companies are not as dependent on oil; the seemingly insatiable demand for computing power to fuel the relentless demand for AI reconfirmed their aggressive growth stories and pushed shares higher. FOMO kicked in, momentum buyers piled in on the rising tide and major averages rose smartly. Gains were 3.2% (Dow) 4.5% (S&P500), 5.6% (Russ 2K), and the Nasdaq an incredible 6.8%... in just a week.
I still don’t get it. There hasn’t been regime change in Iran… most reports suggest that the new leadership is even more militarily inclined and no less religiously fervent. The Straits of Hormuz remain effectively blocked. Conflicting signals and messages from both sides are doing nothing to clarify the situation. Important products that move in meaningful quantities along that waterway – high purity helium used in semiconductor manufacturing, sulfur and ammonia used in fertilizer production, aluminum – aren’t moving. Cancellation of flights and rationing of jet fuel has begun in many countries. The secondary and tertiary impacts of the imminent shortages and the higher fuel prices are not clear or even known yet. On hand inventory has likely muted the impact to this point. Economic consequences beyond the obvious - the much higher gas prices - will increasingly emerge. Even if everything were to settle completely this weekend, nobody expects a return to pre-war levels of anything for months. How are these the conditions for a booming market and a strong economy?
Since I am trying to be helpful with these remarks, I must tell you that my continued skepticism is a minority opinion. Most market analysts are predicting much higher share prices by year end. They are telling investors to look past the current geopolitical and military hostilities, that this will resolve soon enough and when it does, deregulation, tax cuts, and the AI boom will drive economic growth. Even the war is viewed as a positive economic driver - consuming weapons that will need to be rebuilt, creating destruction that will generate construction activity. Maybe they are correct... they have been doing this longer than me. I remain skeptical that we will get past this so easily.
The widespread negative investor sentiment levels reached in early March was a classic contrarian signal – when pessimism prevails it is mostly a good time to buy. Similarly, when everyone is optimistic, like now, that is a time for caution. The unanimity of expectations for higher share prices by year end is worrisome. The action this week has carried the market too far too fast. Maybe the market averages end the year higher but there will be major bumps along the way. This is not a suggestion to sell, just a repetition of my previously incorrect advice – be cautious about committing new capital. Many companies will face supply and cost issues. The market’s current risk-on posture could shift without warning. - harvesting some of the very recent gains, unloading ideas that haven’t worked, is still prudent and recommended.
Enojgh of my concerns... I hope I continue to be mistaken. Meanwhile, the focus on the availability and pricing of fossil fuels is an ironic context for Earth Day which is being celebrated this weekend. In Montauk, we are encouraging septic system upgrades and having a town wide litter collection effort. Keeping with that spirit, I am attaching a link to a fascinating article about wastewater. From a recent Stanford alumni magazine article, it suggests how completely misguided we are in our attitudes about sewage… it should be seen as a great resource as opposed to a smelly scourge. Our global water issues are steadily presenting themselves – this is a very encouraging take on one aspect of the issue.