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Yesterday on

Something I keep coming back to when I talk to newer investors is a thought experiment that sounds almost absurd at first. Imagine you had perfect foresight and knew in advance exactly which events would happen over the coming days. Most people assume that would be the ultimate edge and that making money from it would be easy. It isn't always. More often than you'd think, the market reacts to "news" in ways nobody would have predicted, and knowing the event ahead of time tells you surprisingly little at times about the price move that follows. This weekend gave us what's maybe the latest example. Nvidia is one of the most important companies in the world right now, if not the most important, and it sits at the centre of the entire AI ecosystem. On Sunday, Jensen Huang told staff in an email that he had an affair, and the board opened an independent investigation into allegations that the woman is a Chinese spy. Wow. If someone had told me last week that the founder and face of the AI trade would be caught up in a national security story like this, I would have expected the market to be down today. Given the sentiment we saw last week, which turned into the S&P 500's worst week since April 2025, I'd probably have bet on it being down quite heavily. Instead, as I type this, the Nasdaq is up almost 3%. Nvidia itself is lower, but the broader market seems to have shrugged the whole thing off. Of course, I‘d take that edge if offered to me regardless.

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2d ago on

Everyone seems to be bracing for another wild week in the markets, and I can feel the nervous energy in my feeds already. So before Monday's open, I want to share a few general investing principles that help me get into the right frame of mind. Maybe they'll help you too. Last week was rough. The S&P 500 fell 2.68%, its worst week since the tariff crash in April 2025, and the Nasdaq dropped 3.37%. It wasn't a one-off. The S&P has now declined four weeks in a row, falling 1.95%, 0.47%, 0.57% and 2.68%. The Nasdaq also has four straight losing weeks, with the last three at minus 0.71%, minus 2% and minus 3.37%. It's no surprise that many of you are wondering what the coming days will bring and what you should do. There's a strong urge to force something just to feel in control. That's action bias, and in my experience it more often than not works against the investor. In investing I've come to see patience as a real superpower. Doing nothing can be a mistake too, because markets can turn quickly and sitting still sometimes means missing attractive opportunities. Still, when I look back, waiting longer has usually been the right decision. When I acted hastily, hindsight mostly showed it was a mistake. I'm generalizing, of course. A mentor of mine told me today that it's best to let opportunities come to you and not chase them, and I couldn't agree more. Of course, how to approach the week differs depending on whether you're sitting on 2%, 10% or 80% cash. If it's 80%, I'd look at your risk management first, but that's a whole other debate. If you pick stocks yourself, use this time to tighten up your research. You'll almost certainly find something interesting. As I've said before, we have one index but two markets underneath it. A good chunk of companies have been struggling for a while, but breadth has actually started to recover. I saw a statistic the other day that I'm quoting from memory, so please check the exact numbers yourself. It said the average S&P 500 stock fell about 0.7 to 0.8% last week, while the median stock was actually up around 0.8%. That's a very different picture from the index's 2.68% drop. So while some AI/semi names got absolutely crushed the former market losers seem to have actually done quite well. The headline number rarely tells the whole story. So stay calm, don't rush, and let the opportunities come to you.

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1w ago on

From my latest portfolio update post: "I believe this is one of the toughest markets for stock pickers I’ve experienced, and at the same time one of the best. You may wonder why? Let me start with the tough part. Market breadth is extremely narrow. If you’re a US-focused investor and you haven’t owned the tech and AI names that make up a large chunk of the index, chances are you’re trailing the market. You may well be looking at a negative year while the headline numbers look perfectly fine. And the headline numbers do look fine. The S&P 500 is up around 10% this year, on top of a strong five-year run, and on a rolling basis the last 15 years rank among the best stretches the index has ever (!) had. Cullen Roche posted the first attached chart below on Friday. Even at the intraday low of a rough week, the index sat only 3.6% below its all-time high. That’s a rounding error next to the 20% drawdown of 2022, let alone the 44% and 51% collapses of 2002 and 2009. Now look underneath… (see second attached image) Roughly 82% of the index’s constituents trade more than 10% below their all-time highs. Fully 59% are down more than 20%, the conventional threshold for a bear market. Four in ten have lost more than 30%, and almost one in five has been cut in half. And I believe this chart was created more than two weeks ago. Arguably, there has been more carnage under the hood since. A single index, then, but effectively two markets. The first is a handful of mega-caps tied to the AI build-out, heavy enough to drag the headline number wherever they go. The second is everything else, and that second market has been in a bear market for a while now. This is also where the opportunity lies. If you work bottom-up and judge individual businesses on their own cash flows, the second market is where I’m finding high-quality companies at multiples I haven’t seen in years. Meanwhile, index-level valuations, distorted by the mega-caps, suggest everything is expensive."

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1w ago on

Around 60% of the market is already in a bear market according to @KobeissiLetter (see tweet below), and on top of that we get a day like today with the Nasdaq 100 down more than 3% and the S&P 500 down close to 2%. This is a really tough environment to operate in, and I think the index level hides a good part of it. The largest weights in the S&P are semis, AI and big tech, and they don't necessarily reflect the state of the broader economy. Underneath, there is real weakness on the consumer side. Keep in mind too that many US companies generate a large share of their revenue abroad, so that weakness is a global story as much as an American one. My message is simple: hang in there. It's always darkest before the dawn, and markets often bottom well before the economy recovers. Let me offer a simple thought experiment. At some point, the conflicts in Iran and Ukraine will be resolved. When that happens, oil prices will likely come down, inflation will probably follow, and central banks will eventually have room to cut rates again. I know this is an extremely simplified view of macro, but sometimes it helps to simplify. Just imagine the conditions that would create. Combined with valuations that have already come down, I think that would be a sound foundation for another multi-year bull market. Add IPOs from companies like Anthropic and OpenAI to the picture, and sentiment could look very different from today's. That is why I think a day like today is close to the ideal environment for an opportunistic stock picker. The market is selling almost indiscriminately, with investors raising cash, even rotating out of gold without much regard for the underlying fundamentals of what they sell. If you can take a long-term view and focus on the cash flows of individual businesses, some stocks are trading at almost ridiculous levels. Clearly not all of them, but a select few now look priced to deliver strong returns. This is not investment advice, but my hunch is that right now is probably not the worst time to put some of your cash to work where the market is overdoing things.