Predictions Don’t Matter

Let’s face it folks, the market is on a heater. The old saying, ‘This time is different’, while almost always wrong, appears to be working now. Perhaps social media has changed the game and today’s investors follow different rules than fundamental things like earnings and valuations. Even Warren Buffet had to adapt as he was a strict follower of Benjamin Graham’s philosophy of buying great companies at low valuations for years but had to soften his approach when he started adding Apple into his portfolio, a purchase he says has made more money for Berkshire than anything and everything he has ever bought in his tenure. Today he would have to take it up to yet another level and pay no attention to fundamental things like p/e ratios, debt ratios and sales. This is a major reason he had some $338 billion dollars sitting in cash when he handed the company off at the end of last year. It is not easy teaching an old dog new tricks. So, while this market sits at all time highs and seems to be, on the surface overvalued, there is no reason it won’t charge ahead further in 2026 because today’s investors simply do not care about valuations.

One of my so called predictions, a client reminded me of this week, was the almost guaranteed chance of a recession I wrote in 2026…or was it 2025…or was it 2024? And yet, where is the recession? It seems 100% of analysts you hear from will tell you the economy is strong and there is no recession in sight in 2026. Could it be that today’s investors have the power to move the markets up through any economic slowdown on the horizon and change the narrative? Does Reddit now control the US economy? I guess it’s possible, but what if it isn’t? I would bet most investors right now have no fear of a market correction and do not believe it can or will happen. The events of 2008/09 are washed away from the collective memories of investors much like a painful childbirth is forgotten by the mother. In 30% of calendar years the market suffers a 20% decline in prices. With all the negative headlines swirling around today you would certainly expect 2026 to be one of those years, but nothing is cast in stone as stocks absorb all these negative headlines into prices already so you can’t out guess them. I struggle to find a comparison on this bubbly market to other over valued markets in history. It’s not tulip bulbs certainly because an ounce of gold at any price is worth more than a wilted tulip. It’s not the dot com market set up either as these tech companies actually have earnings. But oh, these valuations…Bloom Energy, Broadcom, Tesla…the list goes on. I guess we can call this the greater fool’s gamification market. Just find someone to pay you more for your overvalued shares today than you paid yesterday and you are golden. For me, in an advisor’s role, this is the worst of times. Advise buying stocks and you could be doomed, advise selling stocks and you most certainly will be doomed. Investors not only want to make as much as possible when the table is hot, but expect not to lose when things crap out too. Sooo, no predictions here folks as they don’t work and they don’t matter. Pick whatever headline or social media post you want to follow, they will catch your attention and make you read further (that’s what headlines are for) but they do not matter in the long run. The highest returns last year came from Mexico and Canada. Who could have predicted that given the headlines about tariffs. And gold at $5,500 an ounce and silver at $110 what is that telling us about the future?

These are assets that only move once every 30 or 40 years or so but are predicted to rise every year by somebody…the old broken clock theory. At the beginning of every year there are dozens of market prognosticators giving their outlook for the year and almost universally they are wrong. The most often phrase you hear every turn of the calendar is that this year is truly ‘a stock pickers market.’ Well given that almost 55% of the S & P’s performance came from just ten stocks last year then, yes, it is always a stock pickers market. Good luck picking the right ones! Enjoy the bull market out there as since it is February everything should be coming up roses (I predict)! Happy Valentine’s Day!!