It’s what You Keep…
September 26, 2026
Knowledgeable investors understand that the action and movement in stock markets is more predictive than historical. Investments are made based on anticipated future events and results. The resulting activity gives a window into investors’ expectations of the state of things six to nine months ahead.
Still, unexpected events – financial, geopolitical, even medical – can unexpectedly and completely seize the narrative. The March 2020 appearance of the Covid plague and the April 2025 announcement of the ‘Liberation Day’ tariffs were recent examples. Markets become more volatile, a sudden lack of clarity about what the future holds makes both individuals and institutional managers nervous. Then markets are often overly reactive to headlines. That is, in fact, what investors are facing at the moment.
The war in Iran was an unexpected event, not to mention its duration and some of the consequences, particularly its impact on energy markets. Repeated assertions/promises of its ending never prove out and add to volatility and uneasiness. Similarly, the rapid development of AI and the everchanging narratives about the eventual winners and losers has created additional uncertainty in the investment landscape.
The lack of clarity and the consequent uneasiness has had a clear impact. Recent research by Goldman Sachs has highlighted an historic drop in market correlation. That finance lingo simply means that the percentage of stocks moving in the opposite direction of the S&P 500 index on a daily basis has reached unprecedented levels. The index rises yet many stocks fall. The index falls and many stocks nonetheless show gains for the day.
Despite all of this uncertainty and uneasiness, the S&P 500 sits less than 1% from its all-time high (7743 v. 7799 on 8/13/26). The VIX (Volatility Index), often thought of as a gauge of investor fear and anxiety, is currently below 15 (almost 20% below its long term average of 18.6). Based on that, one might think that all is well, investors are happy, portfolios are swollen with gains. That, however, is not really the case.
The 50-day moving average is a technical analysis indicator that smooths out daily price movements to look at the price average over a ten-week period. When stocks trade below it, it is an indicator of a downtrend. As of yesterday’s close, nearly three quarters of the S&P 500 stocks are trading below their 50-day moving average. What that means is that there is a lot of weakness in the broader market, that the recent record high reached by the S&P 500 index is misleading, resulting from the rise of only a small group of large company stocks. The broader market has not really participated.
Why am I telling you all this nerdy finance stuff? Because it is likely that when you look at your portfolio statements in a few days it will not reflect a market sitting near all-time highs. There may be many stocks that you own that still have large capital gains though now they sit significantly down from recent peak prices. You may be tempted to talk to your advisor about selling them, locking in some of the gains, afraid that further declines are imminent. In most cases, that would be a mistake.
The market is in an oversold condition meaning that sentiment is overly negative. The economy is still growing and even if the outcome of all the AI development is uncertain, what is clear is that it is creating a lot of business activity. Getting out of losing positions is one thing and often not a bad idea – the cash produced can earn a safe return of 4+% in a money market fund and the loss is useful to offset future capital gains.
Selling winners that have declined is another matter. Most of the time, successful companies remain so and when market sentiment turns, they will rise again. You might happily sit with the cash proceeds of a sale for too long, not reinvesting in the company or another before you have missed some of the rebound, waiting for another decline that might not come.
Most importantly, don’t overlook the fact that it is not what you make, it is what you keep. Unless the selling is being done in a retirement account, the realized gains will create a tax obligation and you will be left with less. So think twice before you nervously lock in profits – if nothing is wrong with the company, if the basis of your investment remains intact, your patience will be rewarded. Sit tight.
Apologies if today was a bit too wonky – it is an unusual time in the markets, especially considering the state of the world. Let’s think about something else. From the tale of Icarus forward, mankind has fantasized about being able to fly. Maybe it is not as farfetched as it seems. The link below is to an article out of Science News which details some remarkable findings. People who have used virtual reality to simulate flying like a bird have had changes to their brains. Images of wings for these people produce similar responses as images of arms, meaning that they are treating wings more like body parts. Sure it remains a fantasy and currently a bridge too far but with some DNA meddling, some plastic surgery…