Humble and Attentive
December 20, 2025
2025 is drawing to a close. It has been another rewarding year for investors. That’s three years running and, surprisingly (to me at least), the overwhelming consensus is that the market will be up again next year. Until very recently, there have been few dissenting voices on that rosy outlook. Even now, resounding bubble talk notwithstanding, the gloomy voices remain the minority.
Yes, almost all analysts are projecting rising company earnings and revenues. It is also expected that the Fed will further cut rates. Rate cuts, rising earnings…it is a combination that fuels market gains. There is even data to support this scenario – when the Fed cuts rates with the S&P 500 within 1% of its all-time high, a year later the market was higher 100% of the time. That’s every single time. The median gain was 15%.
Rising earnings do confirm that the economy has strength. The economy and the stock market, however, are not bound at the hip. The market is forward looking, trading off expectations for results 6-12months hence. If sentiment about the future dims, if consumer confidence declines, the market can sink even without a recession. Too much market consensus has historically been a signal to be prepared for the opposite, to take the other side of the trade.
I believe that investors are too complacent, buying every dip, expecting the rising market to keep going. The renowned economist John Kenneth Galbraith suggested that the problem, and the fuel, for rising markets is not the availability of too much cash and private credit but rather the boundless hope and fleeting memory of investors. Each generation convinces itself that this time is different. It hasn’t been yet. Please don't misunderstand me... though I am wary of the consensus, I am not expecting disaster either. In all likelihood a very bumpy ride, maybe with some limited gains by year-end.
For the optimistic among you (and your advisors), resist the temptation to charge into the market when it is rising, overcome the FOMO…the more interesting opportunities will come when you can see the bargains available in a market decline, sentiment shifting, and volatility spiking. In the meantime, pay heed to the well-worn cliché ‘never confuse a bull market with intelligence’. Sure, you have done well for several years now, but the rising market was a major contributor. Don’t be overconfident, don’t get complacent, stay humble and attentive.
Again, there will be volatility. For the pessimistic among you, resist the temptation to give in to your concerns (and the bubble chatter) by unloading even the good, well-run companies because you fear declines. Andrew Ross Sorkin, CNBC anchor, NY Times columnist, has authored two books about market crashes. The most recent, about the crash of 1929, just came out. He was recently interviewed by David Remnick of the New Yorker. While he did see parallels in the current moment with previous market crashes, I prefer to leave you with this summation he gave and repeated twice: ‘In the last 100 years, it was much more profitable to be a professional optimist than it was to be a professional pessimist.’ Take note. Be attentive.