It is not a Stock Market…
January 24, 2026
It is a new year and yet, the more things change, the more they remain the same. This week presented the world, and investors, with another unexpected set of pronouncements from President Trump that roiled the markets. This was followed by the market resilience which has appeared repeatedly when the previously named TACO (Trump always chickens out) developments unfold - tariffs are rescinded or delayed, the rhetoric is calmer, sentiment improves, and share prices recover. There have been numerous examples in the past year so nobody should be surprised by any of this despite the unpredictability of the occurrences.
These sudden economic and geopolitical threats are unnerving to many and have created, and maintained, an air of uncertainty that continues to hang over the markets. It has heightened investor nervousness. It is clearly not the best investment climate, particularly in a market that has had three years of strong returns and is, by most accounts, relatively fully valued. Volatility ensues.
Against this backdrop, one might wonder why so many experts and market pundits are mostly optimistic, predicting that the markets will finish the year at least 5-10% higher. Well, it is simple – they almost always do. Paul Hickey, founder of Bespoke Group – a very insightful outfit consistently producing compelling market analysis – has reviewed Wall Street market predictions from 2001 forward. The consensus forecast has predicted market gains – wait for it - every single year...100% of the time. Markets have risen in more years than they have fallen - about 2/3 of the time so, on balance, investors have been rewarded for being optimistic though clearly every year. However the Wall Street crowd has an incentive to keep you trading and invested so, as you contemplate your own investing decisions and market expectations for 2026, and especially as you read others’ views, pay attention to your sources.
Unlike the Wall Street crowd, Lava Wealth has no incentive to see an ever rising market. The continued strength of the market has surprised (and yes, pleased) us. Nonetheless, we are wary... very. Sure, there is a positive tilt to reduced regulations and changes to business related accounting rules. Yes, many foreign companies have made announcements (we wonder about the follow through) of multi-billion dollar manufacturing investments in the US in the form of new and expanding factories. Still, it is inconceivable that there won't be a price to pay in the long run for the hostile attitude the administration has projected towards our allies, the bullying tactics, the casual insults to other cultures. It won't be as dramatic as the threats or as immediate. More like a steady drip of declining interest in American goods, finding other places to travel, etc. Already, there is an unloading by other countries of Treasury debt, a steady decline in the value of the dollar. I wonder about the impact on tourism, the incentive for brilliant young people to find another place to study and start businesses, the loss of new generations of really effective, insightful, talented leaders.
There is a time-honored saying – you are investing in a market of stocks, not a stock market. Now, more than any time in the recent past, it will be important to understand this in a fundamental way. There will be new winners and losers, some of which may not be so obvious. At the start of 2023, after precipitous declines in 2022, and again last April on the heels of the ‘Liberation Day’ tariff announcements, buying a broad portfolio of stocks without overly cogitating about your decisions would likely have served you well. In 2026, that won’t work. Momentum has slowed, values on many individual stocks are stretched, and the ‘AI trade’ has yet to definitively reveal the ultimate winners and losers. Discernment and patience are advised… share price movements often do not relate to underlying fundamentals.
Microsoft needs no introduction – it is a wildly successful company running numerous businesses with multiple revenue streams and a large, very active role in AI related matters. As of this week, however, its shares were down 20% from its recent high, achieved less than 6 months ago even though the market was still rising during that time. Maybe the shares were a bit highly valued...still, was that much of a decline warranted? Then today it rebounded nearly 4%. What changed? There were no attention getting headlines so what caused the pop? Good question. What caused the decline anyway? Another good question. Should you buy some if you don’t own it? Sell some if you do? How sanguine are you in your view of the prospects for the company... and the share price?
Consider the field of cybersecurity. Like many, I considered this to be an obvious place to invest. Frankly, it seemed like almost every company in the field that had achieved even a modest level of adoption was a good place to deploy capital, almost a no-brainer. In hindsight, that is so weak - a totally insufficient analysis on my part. Cloudflare ($175 today) started 2025 at $112, got as high as $260. Crowdstrike’s ($454) journey over the same time frame started at $359, peaked at $566. Sentinel’s ($14) numbers were $22 at the start of the year and mostly downhill since. Palo Alto Networks ($180), a darling of many, started at $183, peaked at $223, and so forth. All have revenues in the millions and even billions, most have yet to show a profit. Don’t you agree that it is a good field to invest in? Yet, you would have made money on Crowdstrike and Cloudflare, kind of broke even on Palo Alto (while the market rose 15+%), lost more than a third of your stake with Sentinel. Did you hang in during ride down 30% from the peak? Why? Will the money losers prevail and eventually justify their valuations? Are the winners today those that are profitable or those with larger share price gains? Will this remain the case going forward? No lay-ups here anymore.
Don’t be concerned if you have a bit more cash on hand...maybe you sold some losers, trimmed some winners. Money market funds are still around 4% so you can hold the cash and still earn something. Patience. Be watchful for real opportunities - like when a company whose shares you already own reports good numbers and the share price declines…maybe that’s an opportunity to add to your position. Don’t chase the rallies, resist FOMO. And please don’t dwell on inevitable mistakes. Be kind to yourself (and your advisors)... this won’t be an easy year in the markets even if it does end up being a positive one.
There is no link to a new article this week…nothing I read recently particularly moved me, certainly nothing that would reach the high level of response that last column’s article on the Moylan Arrow elicited. If you didn't read it, I will give you another opportunity with the link below...a short great tale about the origin of a wonderful, totally obvious idea that is now ubiquitous, including in all of your lives.