Borrowing money to buy stocks is as old as the stock market. Every era dresses it up in new clothes. In 1929, an American could buy $100 of stock with $10 down, and everyone from chauffeurs to senators did. This summer’s model made its debut in South Korea. The wrapper was new. The ending was not.

Once again, the monthly scoreboard belied the turmoil underneath. The S&P 500 slipped 0.1 percent to close at 7,490. The Dow rose 0.3 percent for its fourth straight winning month. The Nasdaq fell 3.2 percent. Under the hood, it was one of the wildest months in years. A $45 billion American hedge fund was forced into liquidation. The world’s hottest stock market, South Korea’s, fell almost 11 percent in a single day. American semiconductor stocks dropped 20 percent while their businesses reported unprecedented orders, profits and backlogs.

The KOSPI, Korea’s version of the S&P 500, was until July the best-performing major market, roughly doubling in a year. Two companies, Samsung Electronics and SK Hynix, make most of the world’s memory chips (the foundation of the artificial intelligence boom) and together represent roughly 60 percent of the KOSPI index. In late spring, Korean brokerages began marketing funds that borrowed money to double the daily moves of those two stocks, and margin debt hit all-time records. The average small investor was carrying about three borrowed dollars for every one of their own.

An investor who owns shares outright can ride out any storm. An investor who borrows to buy shares cannot, because when the price falls far enough, the lender wants its money back. That demand is a margin call, and investors who cannot pay have their shares sold for them at whatever price the market offers. Here is the vicious part: the forced sale pushes prices lower, which triggers the next investor’s margin call.

Memory chip prices cooled only modestly in early July, but that was enough. By late July, 1.2 million Korean accounts had received margin calls, and some 360,000 were sold out entirely. That’s roughly one working-age South Korean in 30. On July 28, the KOSPI fell 10.8 percent in a single session. Regulators banned new leveraged funds and tripled the cash required to trade the old ones, arriving, as regulators usually do, after the horse had left the barn.

A crash in Seoul may sound like somebody else’s problem. It is not. Most diversified American portfolios hold these companies through international funds, and the world’s investors treat the entire AI supply chain as one trade. Samsung and SK Hynix chips fill American data centers, so when forced sellers in Korea dumped those shares, traders worldwide marked down everything related: Micron, Intel, Nvidia, the equipment makers — all of it. That is how the Philadelphia Semiconductor Index of American chipmakers lost 20 percent in a month. Anyone who owned a technology fund, or a plain S&P 500 index fund, absorbed a sliver of Seoul’s margin calls without ever placing a trade.

The month’s other casualty was homegrown. A 24-year-old former AI researcher ran a $45 billion hedge fund called Situational Awareness, which owned the AI build-out in concentrated form: chipmakers including SK Hynix and Micron, data center operators, and the power companies that feed them, hedged with bets against software companies such as Adobe. The fund reportedly held about four dollars of stock for every dollar of its investors’ capital. In July the trade failed at both ends: the chip and infrastructure holdings fell 35 percent to 47 percent, dragged partly by the Korean unwind, while the software stocks the fund bet against rallied. The fund’s banks issued margin calls, and on July 30, Citadel, the firm founded by Ken Griffin, bought the entire public portfolio to keep the wreckage contained. John Maynard Keynes gets credit for the warning that “markets can stay irrational longer than you can stay solvent.”

The Federal Reserve added its own tension. The committee held rates steady on July 29 over three dissents in favor of an immediate hike for the sharpest split in years. Chairman Kevin Warsh cut the policy statement to 130 words, offered no guidance, and declared the Fed has “no tolerance for persistently elevated inflation.” The bond market took the hint and tightened, driving the 30-year Treasury yield above 5.2 percent — its highest since 2007. The data pulled both ways: growth slowed to 1.5 percent, employers added just 57,000 jobs in June, and core inflation sat at 3.4 percent. A central bank staring at weak hiring and hot prices has no good move, so Warsh made none.

Oil made everything harder. The ceasefire with Iran collapsed, attacks on tankers resumed, and brent crude climbed toward $98 a barrel — up more than 30 percent for the month. Energy stocks (the best sector by far) surged 12.8 percent, as money rotated into banks, industrials and health care. Buried in all this is good news: the equal-weight S&P 500, which gives the 500th biggest company the same vote as the first, hit record highs in late July. The average American company is doing fine.

The companies paying for the AI build-out kept paying. Microsoft held its spending plans steady, grew its cloud business 43 percent, and gained nearly $450 billion of market value in a day. Alphabet grew its cloud business 82 percent and fell 7 percent anyway; its spending pushed free cash flow negative for the first time in decades. Meta’s free cash flow shrank 91 percent and its shares sank with it. The market stopped paying for promises about artificial intelligence and started paying for cash produced by it. That discipline is overdue, and it favors exactly the kind of company worth owning.

Used wisely, debt is one of the great tools of prosperity. Families buy homes with it and companies build factories with it. What precipitated July’s casualties was a particular kind of borrowing: a loan secured by a stock price. A mortgage lender cannot call the loan because a home’s value dips this month. A margin loan is remeasured constantly against a price that moves by the second, and can be called at the worst possible moment. July’s casualties pledged their stocks as collateral, surrendering an advantage the ordinary investor holds: the freedom to wait. The investor who owns stocks of good businesses outright, in sensible variety, keeps that freedom, and can be early, unlucky, or temporarily wrong and still come out whole and even ahead.

William Rutherford is the founder of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or evaluation@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post Beware of when the debt collector comes calling | Opinion appeared first on Daily Journal of Commerce.

Washington Irving gave us Rip Van Winkle, who slept for 20 years and missed a revolution. An investor who dozed off on New Year’s Eve and woke on the first of July would have missed a small one of his own. He’d be pleased to see the S&P 500 up 9.6 percent — a full year’s worth of gains delivered in six months — and he would know at a glance that something remarkable had happened. What he would not know is how hard those gains were to hold onto. The first half of 2026 packed in a war, an oil shock, a 7 percent plunge, a new Federal Reserve chairman and two dozen record highs. Our sleeper collected the returns while skipping the fear.

The numbers tell the story of a round trip. When war broke out with Iran in late February, the S&P 500 fell as much as 7 percent as oil spiked and tanker traffic through the Strait of Hormuz collapsed. From those lows, the market staged one of the strongest recoveries in recent memory. By June 30 the index stood at 7,499, having set its 24th record high of the year on June 2. The Nasdaq gained 13.1 percent for the half. The Dow rose 9.8 percent for its best first half in five years. The Russell 2000 index of small companies did better still to end up roughly 20 percent. The second quarter alone delivered a 15.2 percent gain in the S&P 500 for its strongest quarter since 2020.

Two forces drove the recovery. The first was the relentless build-out of artificial intelligence infrastructure. The Philadelphia Semiconductor Index surged 88 percent in the second quarter — its strongest quarterly gain since the index was created in 1993. Micron Technology captured the moment. The U.S.-based memory chipmaker reported record quarterly revenue in late June and announced long-term supply agreements with 16 strategic customers stretching to 2030. It was an indication that one of the market’s most famously cyclical businesses is perhaps becoming something steadier. The build-out keeps broadening: capital spending plans among the large cloud providers rose again after first-quarter earnings, and analysts now expect S&P 500 earnings to grow nearly 23 percent this year, up from the 14 percent expected in January. Rising earnings estimates, not expanding multiples alone, have carried this market.

The second force was peace, or at least the prospect of it. On June 17, the United States and Iran signed the Islamabad Memorandum — a 14-point framework that opened a 60-day negotiating window and a phased reopening of the Strait of Hormuz. By June 25, 35 tankers transited the strait in a single day — the first time traffic returned to its prewar range. Brent crude fell 38 percent over the quarter to about $73 a barrel, close to where it traded before the war began. The ceasefire remains fragile. An attack on a commercial tanker in late June drew retaliatory American strikes, providing a reminder that the peace is a work in progress. But a market that had priced oil for war spent the quarter pricing it for peace, and economically sensitive stocks rose on the change.

June 17 was a busy day. The same date the ceasefire was signed, Kevin Warsh wrapped up his first meeting as Federal Reserve chairman. The committee held rates steady at 3.50 to 3.75 percent by unanimous vote, but the signals around the decision were hawkish. The policy statement was cut dramatically in length and stripped of its long-standing bias toward future cuts. The committee’s projections now imply there will be at least one rate hike before 2026 ends, and that is a shift from March. Warsh, a skeptic of forward guidance, declined to put his own forecast in the famous dot plot of regional Fed governor opinions at all. The inflation data explains the caution. Core PCE inflation rose 3.4 percent in May from a year earlier — the hottest reading since late 2023 — as the spring’s energy spike worked its way into goods and transportation prices. A Fed that spent last year debating cuts now debates hikes. Markets took the change with surprising grace.

For all the drama, the most important development for long-term investors may be one that is less obvious: market leadership is broadening. In June the S&P 500 slipped about 1 percent and the Nasdaq fell 2.75 percent, while the Dow gained 2.7 percent and small caps kept climbing. The magnificent seven mega-cap stocks fell roughly 9 percent for the month even as the average stock advanced. There is an old Wall Street saying that when the generals falter, watch whether the soldiers keep marching. When a handful of giant companies carry an entire index, gains are fragile; when thousands of companies participate, gains rest on firmer ground. The apprehension around the massive SpaceX IPO drawing money out of other stocks did not materialize. The Russell 2000 has now risen five consecutive quarters, industrials are up about 20 percent this year, and value stocks outpaced growth in June. Breadth of this kind usually reflects widespread earnings performance. A rally with many engines can afford to have one sputter.

Looking forward, inflation is running well above the Fed’s 2 percent objective, and a central bank leaning toward hikes tends to cap what investors will pay for a dollar of earnings. Economic growth is likely to downshift from the first half’s stellar pace as fiscal support fades and households rebuild their savings. The termination of the ceasefire with Iran in early July increases uncertainty. Positioning in the market’s favorite names is crowded, and crowded trades correct suddenly. None of this argues for heading to the exits; it argues for owning quality. Companies with strong balance sheets, recurring revenues and robust, free cash flow have a long record of treating turbulence as an opportunity rather than a threat.

Which brings us back to Rip Van Winkle. No one is recommending a six-month nap, least of all this column. But the sleeper had a worthy advantage: he never had the chance to act during the panic of late February, when selling felt safest and would have cost the most. An investor who left the market during the plunge missed the strongest quarter since 2020 and a year’s worth of gains along with it. The daily story this year was a war, an oil shock and a new hand at the Fed. The long-term story was rising earnings, broadening leadership and quality companies compounding quietly beneath the noise. The returns came from the second story. They usually do.

William Rutherford is the founder of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or evaluation@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post A rally with many engines: the lesson of 2026’s first half | Opinion appeared first on Daily Journal of Commerce.

After two months of bad news arriving fast and furious, May 2026 did something the previous quarter rarely allowed. It rewarded the long-term investor.

The major indexes finished the month firmly in the green. The S&P 500 rose 5.2 percent and closed at a record 7,580. The Nasdaq climbed roughly 8 percent. The Dow Jones crossed 51,000 for the first time. It was the S&P’s ninth straight winning week — a streak previously matched at the end of 2023. Considering where the market stood in late March, with the Nasdaq 100 in correction and oil moving vertically, this was a recovery that few predicted.

The cause of the rebound was the same waterway that caused March’s panic: the Strait of Hormuz, which was closed by Iran’s Revolutionary Guard in late February. The United States and Iran reached a tentative 60-day memorandum to pause hostilities and restore shipping. Brent crude, which had spiked toward $120, fell nearly 19 percent in May to around $92 — its biggest decline since the depths of the pandemic. The ceasefire remains fragile, missile strikes continue in the Persian Gulf as negotiations continue, and any reopening of the Strait of Hormuz will likely be partial at best. The war premium has drained out of oil prices, but the conditions that created it have not been resolved.

While stocks celebrated, the yield on the 30-year Treasury bond surged to 5.2 percent — its highest level since July 2007. Most working adults have never managed their finances with long-term borrowing costs this high. This is not an American phenomenon. Japan’s 30-year yield hit a record dating back to 1999, the United Kingdom’s long gilt bond touched levels not seen since the late 1990s, and German bunds climbed in sympathy. When bond markets around the world move in the same direction at the same time, they are usually saying something worth hearing.

Bond yields are telling us that inflation is not finished. On May 28, the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Index, came in at 3.8 percent year over year for April, a three-year high, with core PCE at 3.3 percent. The energy shock from the spring worked its way through the economy, as it did in the 1970s. Meanwhile, first-quarter GDP was revised down to a tepid 1.6 percent annualized rate, below the earlier 2 percent estimate. Slowing growth alongside stubborn inflation has an unwelcome name that has crept back into the conversation: stagflation.

The Federal Reserve finds itself in an uncomfortable spot. At its late April meeting it held rates steady at 3.50 to 3.75 percent, but the vote was 8 to 4 by the most divided committee since 1992. That is not a committee that knows what to do next. Traders are seriously debating whether the Fed’s next move could be a hike rather than a cut. Adding to the intrigue, the month brought a change of the guard at the Federal Reserve. Jerome Powell’s term as chair ended in mid-May, and the Senate confirmed Kevin Warsh, an inflation hawk who has called for “regime change” at the central bank. Powell will stay on as a governor for now. Warsh inherits the divided committee in June.

So how were stocks able to rally through all of this? AI and data center investment. The information technology sector surged roughly 15 percent in the month. The engine remains the adoption of artificial intelligence, and Nvidia’s widely respected CEO, Jensen Huang, called the current moment the single largest infrastructure build-out in human history. He believes AI is not a passing technology cycle, but a full reconstruction of the physical economy spanning chip factories, data centers, and the power grid that feeds them. A single large data center requires 30,000 truckloads of equipment to build, before even the consideration of the power plant needed beside it. Huang frames this as a chance to revitalize American manufacturing and rebuild a neglected energy grid. Whether the eventual returns justify the staggering capital being committed is the question every serious investor should be asking. But the spending is real.

In March, the worry surfaced that established software companies would no longer have customers, or at least high margins, in an AI world, and were sold off, as if all were doomed. Now the risk runs the other way, with capital flooding toward anything that promises to participate in the build-out. Investing discipline is the same in both directions. A company should earn its place in a diversified portfolio through durable revenue, a competitive moat, and free cash flow that does not evaporate when sentiment turns.

The good times will not roll uninterrupted. Market breadth, while improving, is still narrow, with technology and communication services responsible for the lion’s share of the gains. Add an unresolved conflict in the Gulf, the highest long-term borrowing costs in nearly two decades, inflation running nearly double the Fed’s target, and a central bank in transition, and the case for caution is clear. Yet the fundamentals that matter most to a long-term equity investor remain intact. Corporate earnings are growing, with full-year S&P 500 profit growth projected in the mid-teens. The labor market, while cooling, has not broken. The market rewards the investor who can tell the difference between a bad month and a bad business. As the economist Paul Samuelson once put it, investing should be more like watching paint dry or grass grow. If you want excitement, go to Las Vegas.

May proved a point this column has made in calmer months and panicked ones alike. The investor who stayed the course through the March turbulence was rewarded in May. The one who bolted for the door locked in losses and missed the recovery. Stay invested. Stay diversified. And resist the urge to confuse a noisy month for a broken one.

William Rutherford is the founder of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or evaluation@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post Two markets, two stories; stocks rally, bonds sound alarm | Opinion appeared first on Daily Journal of Commerce.

Last month, I described a market trying to find clarity in chaos and called for painting with a finer brush. April supplied a new canvas. The S&P 500 finished April up roughly 10.5 percent — its best month since 2020. The Nasdaq added more than 15 percent and the Dow gained more than 7 percent. By early May, the S&P had closed above 7,200 and kept rising. A market that had been bracing for stagflation sprinted in the opposite direction.

The reversal was not built on better headlines. The standoff with Iran that closed the Strait of Hormuz remains unresolved. After Iran briefly reopened the strait on April 17, talks broke off and a blockade was implemented. Brent crude settled near $110 and West Texas Intermediate just above $100, with S&P Global telling the world to plan for “higher for longer.” The Federal Reserve held rates at 3.50 to 3.75 percent on April 29, with four dissents. Payrolls came in at 177,000 and first-quarter GDP rebounded to 2 percent annualized from 0.5 percent. The economy is strong, and while the consumer is still buying everything except homes, the real strength is coming from the companies pouring concrete, copper, and silicon into the ground to meet the massive need for computing resources.

That is the story that took over the market in April. Five of the largest technology companies reported earnings, each one expanding its capital spending plans. Alphabet, Amazon, Microsoft, and Meta now expect to spend $650 billion to $725 billion combined on AI infrastructure in 2026. That figure exceeds the GDP of Switzerland and rivals the annual federal Medicare budget. Amazon committed $200 billion, Microsoft $190 billion, Alphabet $180 billion, and Meta raised its range to $125 billion to $145 billion. Apple, the lightweight at $13 billion, gets a free ride on Google’s Gemini integration. Alphabet CEO Sundar Pichai delivered the quote of the quarter: cloud revenue would have been higher, he said, with more compute. Translated: demand is greater than supply, and the only way to capture it is to build.

The data center build-out is not just a tech story. It is an industrial story touching more sectors than most readers realize. Global data center capacity has climbed from 42 gigawatts in 2023 to 62 gigawatts in 2025, with some estimates pointing to 200 gigawatts by 2030. These numbers measure electricity, not computing power. A gigawatt is the rate at which a data center pulls power from the grid, the way miles per hour measures how fast a car is moving.

One gigawatt is roughly the steady output of a large nuclear reactor, or enough to power 750,000 American homes at the same time. The industry has added 20 nuclear reactors’ worth of demand in the past two years, and is on track to add seven times that again by 2030. The 200-gigawatt target is more electricity than Germany consumes at peak, all of it dedicated to computing. The total price tag could reach $6.7 trillion, — more than the annual GDP of Japan. Outside of China, no country can invest at this rate, which is why dollars are flowing into U.S. equities.

The ripple effects spread far beyond Nvidia chips. Power generation is the binding constraint, not silicon. Gigawatts measure the load at any single moment. Terawatt-hours measure the total electricity used over a year. By 2030, annual data center consumption is on track to roughly double to 945 terawatt-hours, comparable to all of Japan’s yearly use and roughly a quarter of what the United States consumes in a year.

Hyperscale operators are signing direct contracts with power producers, restarting nuclear plants, and co-locating campuses next to natural gas turbines. Companies that build the grid, the substations, and the back-up generators have suddenly become AI plays. So have makers of high-voltage switchgear, transformers, and copper wire. Liquid-cooling specialists, once a sleepy HVAC niche, are growing because air alone cannot dissipate the heat from modern chips. Optical networking firms benefit because every GPU cluster requires miles of fiber. Data center real estate trusts have moved from “AI laggards” to “AI leaders” as tenants pre-lease facilities years before they break ground.

Construction firms, electrical contractors, and industrial gas suppliers all draw revenue from the same trough. Thomas Edison once observed that opportunity is missed by most people because “it is dressed in overalls and looks like work.” Few descriptions fit this list better. Analysts estimate 1.6 million AI-related jobs have been created in the past two years, 600,000 more tied directly to the data center boom, and every direct data center job tends to support six others nearby.

None of this means the spending is risk-free. Twelve states have introduced bills to slow or pause hyperscale construction, citing electricity strain, water consumption that could reach 1.7 trillion gallons by 2027, and surprisingly few permanent jobs once the cranes leave. Memories of the 1999 fiber build-out haunt the conversation. That cycle was speculative supply chasing imaginary demand. This cycle is real demand chasing constrained supply, with capacity pre-sold years in advance. The two cycles look similar from the outside. They are not the same.

The lesson of April is not that the bubble talk has ended. The lesson is that spending is producing results flowing through an unusually wide range of industries, not least the end-users of the technology. For long-term investors, the question is no longer whether the build-out will continue. Multiyear backlogs answer that. The question is which businesses will earn durable cash flow from it. Companies with strong balance sheets, recurring revenue, and disciplined capital allocation are the ones whose stories will survive the next sell-off.

The market always finds a reason to be nervous. Right now, the concrete is still curing, the fiber is still being pulled, and the transformers are still rolling off flatbeds. Stay invested. Stay diversified. And follow the wires.

William Rutherford is the founder of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or wrutherford@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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Some months test your patience. March tested your convictions. After two months of violent rotation beneath relatively calm numbers, the geopolitical crisis that had been building since late February exploded into full view. The S&P 500, Dow Jones and Nasdaq all fell about 5 percent, with the Nasdaq 100 sliding more than 10 percent from its recent peak. Remember, 5 percent pullbacks are common and generally happen several times each year, while 10 percent corrections usually occur every two years. This time, all economic sectors finished in the red except one. Energy was the lone survivor, surging roughly 10 percent because of oil prices.

The catalyst for the market decline was the U.S.-Israeli military strike on Iran that began Feb. 28. Iran retaliated with missile and drone strikes against Israeli targets and American installations across the Persian Gulf. But the most consequential response was not militaristic; it was economic. Iran’s Revolutionary Guard effectively closed the Strait of Hormuz to commercial shipping, choking off roughly 20 million barrels of crude oil and petroleum products per day. That narrow waterway handles about 20 percent of the world’s petroleum. Its closure triggered the largest supply disruption in the history of the global oil market and informed Iran that it has an even stronger and more practical negotiating hand than its nuclear ambitions provide.

The price reaction was swift and severe. Brent crude soared roughly 60 percent during March, its largest monthly increase on record, peaking near $119.50 per barrel. West Texas Intermediate crossed $100 for the first time since mid-2022, eventually topping $115. The International Energy Agency coordinated the release of 400 million barrels from strategic reserves. That release, the largest in the agency’s history, supplied only 20 to 25 days of lost volumes.

The damage extended well beyond oil. The strait also carries about 20 percent of the world’s liquefied natural gas and roughly 30 percent of seaborne fertilizer shipments. The supply chain disruptions of 2021 and 2022 came flooding back to mind. As of this writing, despite announcements to the contrary on April 7, the strait remains effectively blocked.

For those who remember the 1970s, the parallels are hard to ignore. The 1973 oil embargo reshaped the American economy for a generation, trapping the Federal Reserve between rising prices and slowing growth. That ugly combination has a name: stagflation. And for the first time in years, Wall Street is using the term again.

The Fed held rates steady at 3.50 to 3.75 percent in March, raised its 2026 inflation forecast to 2.7 percent, and signaled only one possible rate cut for the remainder of the year. The labor market offered little clarity, with February showing a loss of 92,000 jobs before March bounced back with 178,000 new ones. The three-month average was roughly 68,000 jobs added, a relatively anemic number, which supports a rate cut, and thus buoyed stock market optimism when announced in early April.

In the equity markets, the damage was broad but not indiscriminate. Capital fled mega-cap technology and poured into energy, defense, and other tangible assets. The SPDR Oil & Gas Exploration ETF surged 18.7 percent. Software stocks plummeted 24 percent in the first quarter — their worst showing since 2008. Nvidia dropped more than 16 percent from its high, selling on March 30 at its lowest P/E multiple in 10 years. Micron fell 16 percent, despite reporting revenue that surged 75 percent due to a memory chip shortage. When good earnings cannot save you from a macro storm, you know the weather has changed.

Much of the panic in software stocks was driven by fears that artificial intelligence will replace entire categories of business software. Wall Street even coined a term for it: the SaaS-pocalypse. And while the concern is not baseless, the reality is more nuanced than the selling suggested.

We have navigated many technological disruptions over recent decades. The internet was going to kill retail. Mobile was going to kill desktop software. Cloud computing was going to kill the server business. In each case, there were real casualties, but the fears were always broader than the damage. The companies that survived, and thrived, were the ones with real advantages. So, when people are curious whether their software holdings are headed for extinction, we walk them through a few questions.

First, does the company own proprietary data that is difficult to replicate? A company that has spent years accumulating industry-specific data is sitting on something an AI model cannot simply generate on its own. AI tools are only as good as the source data. Control the data, control the value chain. That is an advantage that compounds over time.

Second, does it provide the reliability, security, and accountability that enterprises demand? A hospital is not going to hand its patient data to a general-purpose AI tool and hope for the best. A bank is not going to replace its compliance infrastructure with a chatbot. Businesses want someone to call when something goes wrong. They want their data encrypted, their systems maintained, their uptime guaranteed. That services layer is extraordinarily hard to displace. The real competitive threat will likely come from new AI-native software companies that build better products but still offer all the protection of a traditional provider.

Third, how painful would it be for customers to switch? Change management has been the silent protector of incumbent software companies since the industry began. That friction is real, and it means displacement will not happen overnight, even when the alternative is genuinely superior.

None of this means every software stock is a bargain today. Some of the companies that fell 20 or 30 percent in the first quarter deserved to be repriced. But the indiscriminate selling treated all these companies as if they were equally doomed, and that is rarely how disruptions play out. The market paints with a broad brush in moments of panic. Investors must paint with a finer one.

Adding to the market turbulence, a partial shutdown of the Department of Homeland Security dragged on for over 40 days, becoming the longest on record. Gold and bonds, the traditional safe havens, both failed investors. Gold plunged 10.5 percent in a single week to around $4,492, its sharpest weekly decline since 1983, while the 10-year Treasury yield climbed to 4.32 percent. This was an inflationary supply shock and not a deflationary scare. Everything that does not generate cash flow was punished.

History may not offer a perfect road map, but it offers some comfort. Wars and geopolitical supply disruptions cause severe short-term volatility, but U.S. equities have typically recovered within several months. As often stated previously, the market hates uncertainty, and right now there is plenty to go around. But uncertainty is also what creates opportunity. Companies with strong balance sheets, durable revenue streams, and real free cash flow do not stop generating value because oil prices spike. Their stocks get cheaper. That is not a reason to panic. It is a reason to pay attention. Stay invested. Stay diversified. And as always, do not try to time the market.

William Rutherford is the founder and portfolio manager of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or wrutherford@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post Geology and oil talk: navigating a crisis with calm | Opinion appeared first on Daily Journal of Commerce.

Readers of my column last month will recall that January was described as calm above a storm raging below. The major indexes posted modest gains, while one of the most violent rotations in recent memory ripped through individual stocks and sectors. Did February bring calmer seas? It did not. The S&P 500 slipped less than 1 percent for the month, closing at 6,879. The Dow eked out a small gain, finishing at 48,978. The Nasdaq took the worst of it, falling 3.3 percent to close at 22,668. Once again, the surface told you almost nothing about what really occurred.

The sector rotation that began in January intensified. Money continued pouring out of the mega-cap technology stocks that had dominated the last two years into cyclical sectors: energy, materials, industrials. Wall Street dubbed it the HALO rotation: Heavy Assets, Light Other. Energy stocks surged over 14 percent in January and kept climbing. Materials gained nearly 9 percent. The equal-weight S&P 500, which gives every company the same importance regardless of market value, outperformed the capitalization-weighted index by its widest margin since March 2025. Nine of 11 sectors moved higher. The headline number looked flat only because the mega-cap tech names carrying so much weight were dragging it lower. As noted last month, money is not leaving the market. It is moving to different neighborhoods. In February, those neighborhoods got even more crowded.

What was happening to those technology stocks? Two words: AI panic. Nvidia CEO Jensen Huang proclaimed that February marked the inflection point for agentic AI — the arrival of autonomously reasoning AI that plans, decides and executes multistep tasks. The software sector experienced what the market dubbed the “SaaS-pocalypse.” AI tools capable of performing enterprise-level tasks autonomously sent investors fleeing from traditional software companies. The fear is straightforward: if an AI agent can do the work of a $50,000-per-year software subscription, why keep paying? The software index fell roughly 18 percent year to date, erasing more than $300 billion in market value. It was indiscriminate selling with little regard for individual company fundamentals.

Is the threat real? Markets tend to overshoot in both directions when they encounter a genuinely new force. AI will reshape the software industry, but the notion that decades of embedded enterprise data and complex workflows can be replaced overnight seems premature. Companies with deep vertical expertise and real switching costs will adapt. The ones selling thin wrappers over commodity tools will not. This is how creative destruction has always worked.

The crypto market offered its own drama. On Feb. 5, Bitcoin plunged 18 percent in a single day, crashing below $60,000 and erasing nearly $500 billion from the total crypto market. The catalyst was partly the nomination of Kevin Warsh as the next Federal Reserve chair, a signal that tighter monetary policy may lie ahead. Coinbase lost over $13 billion in market value in four sessions. MicroStrategy reported a $17.4 billion operating loss on its Bitcoin holdings. The much-hyped notion of crypto as the new store of value, versus the dollar and gold, did not meet the test.

The Fed held rates steady at 3.50 to 3.75 percent at its January meeting, with two dissenters favoring a cut. Chairman Jerome Powell maintained his data-dependent posture, and the Warsh nomination added another layer of uncertainty. Here is where the bond market tells an interesting story. Since the Fed began cutting in September 2024, it has lowered the federal funds rate by 175 basis points. Yet the 10-year Treasury yield has risen about 60 basis points over the same period. That divergence has not occurred since 1989. The bond market is signaling concern about the deficit, which is at 6.5 to 7 percent of GDP, and about whether inflation is truly beaten. Services inflation remains stubbornly elevated, even as headline CPI dropped to 2.4 percent.

On the economic front, the picture is one of surprising resilience. The economy added 130,000 jobs in January, beating expectations, though previous months were revised sharply downward. The ISM manufacturing index surged to 52.6, signaling that the long manufacturing recession may finally be ending. Corporate earnings showed strength, with S&P 500 fourth-quarter growth tracking 12.1 percent year over year, well ahead of estimates. Importantly, the earnings gap between the mega-cap giants and the rest of the market is narrowing. Excluding the Magnificent Seven, growth was a solid 7.8 percent.

February also brought a landmark legal decision. The Supreme Court ruled 6 to 3 that the president cannot unilaterally impose burdensome tariffs, invalidating the sweeping tariff regime in place for much of the past year. The administration quickly imposed new tariffs under the Trade Act of 1974, starting at 10 percent and increasing to 15 percent within a day. The tariff landscape remains in flux, and the market hates uncertainty. But the potential for refunds on previously collected tariffs, estimated at over $140 billion, could provide a meaningful tailwind for importers and consumers.

As if all of that were not enough, the month ended with a geopolitical shock. The United States and Israel launched major military strikes against Iran, resulting in the death of Supreme Leader Ayatollah Khamenei. Iran retaliated with missile strikes across the Middle East, targeting military and civilians in Israel, the UAE, Qatar and Bahrain, disrupting airports and causing a mass exodus from Dubai and other business and tourist hubs. The Strait of Hormuz, through which roughly a third of the world’s seaborne crude flows, was “closed” by Iran, although subsequently the U.S. initiated use of military forces to ensure safe passage of ships. Oil prices jumped sharply. Noteworthy is that the 25 most significant geopolitical crises since World War II produced an average S&P decline of 4 percent, a bottom in 15 days, and a recovery in 33. The pattern does not always hold, but it is worth remembering before making rash decisions.

In a market defined by disruption, rotation and geopolitical risk, the temptation is to sell and wait on the sidelines. Resist it. As Gene Fama, the Nobel laureate, once said, “Your money is like soap: the more you handle it, the less you’ll have.” Earnings are growing and broadening. The labor market appears to be resilient. Manufacturing is recovering. The fundamentals remain sound.

What January started and February confirmed is that the era of buying an index and riding the mega-cap wave may be giving way to something more rewarding for those willing to do their homework. The broadening of the market is not a threat. It is an opportunity for disciplined stock picking. Two months into the year, the message is clear: this is a market that rewards selectivity, not passivity. Act accordingly.

William Rutherford is the founder and portfolio manager of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or wrutherford@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post February’s calm conceals a changing of the guard | Opinion appeared first on Daily Journal of Commerce.

There’s an old Wall Street saying that as January goes, so goes the year. If the January barometer is to be believed, 2026 is off to a promising, if turbulent, start. The S&P 500 gained 1.2 percent. The Dow rose 1.6 percent. The Nasdaq advanced 1.1 percent. The S&P briefly touched 7,000 for the first time in its history. Historically, when January has ended positively, the full year has finished higher about 89 percent of the time, with gains averaging 17 percent.

Those index numbers obscure what was happening underneath. January was one of the most volatile months in recent memory, not because the indexes moved much, but because nearly everything else did. The calm above concealed a storm below.

For two years, the “Magnificent Seven” mega-cap tech stocks dominated returns. In January, that dominance cracked. The Russell 2000 outperformed the S&P 500 for 11 consecutive sessions, a streak seen only eight times since 1979. Small-cap value gained nearly 6 percent while large-cap growth went nowhere. Materials surged 9 percent, drawing a record $6.5 billion in weekly inflows. Industrials rose after the ISM Manufacturing PMI showed expansion for the first time in 12 months. Financials attracted $3 billion. Meanwhile, tech funds saw $1.4 billion in outflows in late January alone. The money wasn’t leaving the market; it was moving to different neighborhoods.

This broadening is healthy. When a handful of names drive returns, the market is fragile. When participation is broad, the foundation is durable. For investors who maintained diversified portfolios, January was vindication.

The Federal Reserve held its course. At its Jan. 28 meeting, the committee voted 10-2 to keep rates at 3.5 to 3.75 percent, after three cuts in late 2025. Govs. Christopher Waller and Stephen Miran dissented, favoring another quarter-point reduction. Chair Jerome Powell struck a patient tone, calling the economy “solid” with inflation “somewhat elevated” at 2.8 percent core PCE. Markets now expect two cuts at most this year, probably not before summer. The era of aggressive easing is behind us.

Then came the gold rush. For most of January, one theme dominated: the flight from paper currencies into hard assets. Wall Street calls it the “debasement trade.” The logic is simple. When governments choose inflation and currency erosion, investors flock to things that hold value when money does not. Gold shattered records, surging past $5,600 an ounce. Silver rose more than 60 percent to breach $120 for the first time. The dollar fell to a four-year low amid concerns about federal debt and geopolitical tensions from Venezuela to Greenland. Bitcoin, marketed by its proponents as “digital gold,” conspicuously failed to join the rally. Spot Bitcoin ETFs recorded $1.6 billion in outflows. When investors wanted a haven, they chose the kind you can hold.

But all that glitters is not gold. On Jan. 30, the precious metals bubble burst. Silver plunged 31 percent in a single session, its largest daily decline ever. Gold fell 11 percent, its worst day since 1980. Market veterans recalled the Hunt brothers’ attempt in 1980 to corner silver, which ended similarly when regulators intervened. This time, the CME raised margin requirements on silver from 11 to 15 percent and on gold from 6 to 8 percent, forcing leveraged speculators to liquidate at any price. Margin calls cascaded across markets.

The catalyst was President Trump’s announcement that he would nominate Kevin Warsh to succeed Jerome Powell as Fed chair. Warsh served on the Fed Board from 2006 to 2011 and carries a reputation as a “sound money” advocate skeptical of quantitative easing. Markets read his nomination as a signal that dollar strength would take priority. The dollar surged. Gold and silver cratered. The debasement trade unwound in hours. Whether Warsh proves hawkish remains to be seen, and his confirmation is uncertain, with at least one Republican senator withholding support. But the market’s initial verdict was swift.

What followed was rare. On Jan. 30 and 31, virtually every asset class fell together. Equities, treasurys, gold, silver, and crypto all fell simultaneously. An estimated $10 trillion to $12 trillion in global market value evaporated in 48 hours. Where did the money go? Investors poured $79 billion into money market funds in the final week of January. Money market assets hit record highs. In times of confusion, cash is king.

A partial government shutdown added one more log to the fire. Congress failed to pass a spending bill by midnight on Jan. 30, leaving the defense, state, treasury, and transportation departments unfunded. It was the second shutdown this fiscal year. In a midterm election year, expect more fiscal drama ahead.

What should investors take from all this? First, diversification works. Those who concentrated in tech lagged. Those who spread capital across sectors, capitalizations and industries found opportunity. Materials, financials, industrials and small caps all delivered gains that didn’t exist a year ago. The S&P 500 has had three consecutive years of double-digit returns: 24 percent in 2023, 23 percent in 2024, and 18 percent in 2025.  Valuations are stretched at 22 times forward earnings, above the five-year and 10-year averages. Yet Goldman Sachs projects 12 percent total returns for the year, driven by 15 percent earnings growth. That’s reasonable if earnings continue to deliver.

Second, the gold crash reminds us that leveraged speculation eventually meets reality. The rush was exciting. The collapse was terrifying. Both were temporary. What endures are companies with strong free cash flow, solid balance sheets, and exposure to growing markets.

Mark Twain is credited with the observation that history doesn’t repeat, but it often rhymes. January rhymed with the Hunt brothers, with past margin-call cascades, with every episode where speculators got ahead of themselves. In each case, investors who stayed the course came out ahead. The long-term trajectory of the market has remained up and to the right, through diverse administrations, wars, and gold rushes alike.

Stay invested. Stay diversified. Stay patient. The year is young.

William Rutherford is the founder and portfolio manager of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or wrutherford@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post Calm above, chaos below: January’s hidden turbulence | Opinion appeared first on Daily Journal of Commerce.

2025 offered investors a year that tested nerves, rewarded patience, and reminded us why we stay invested despite the headline news and trading turmoil. The S&P 500 finished the year up 16 percent, the Nasdaq climbed 20 percent, and the Dow Jones Industrial Average rose 13 percent. It was the third consecutive year of double-digit gains. That isn’t bad for a year that included what traders are now calling the “April Shock” — one of the largest cumulative two-day drops for the S&P on record.

December itself was a quiet month. The S&P finished essentially flat, the Nasdaq dipped half a percent, and the Dow eked out a 0.7 percent gain for its eighth winning month in a row. No fireworks or widely anticipated Santa Claus rally occurred at year-end. Santa’s GPS must have malfunctioned, because he instead arrived with his rally in the first few trading days of 2026.

But what a year it was getting there. In early April, sweeping tariff announcements for our closest allies and largest trading partners sent markets into a tailspin. The S&P 500 dropped more than 10 percent in just 48 hours. Trillions of dollars in market value vanished. The financial press was filled with dire predictions. Recession calls multiplied like rabbits in springtime.

When most of the draconian tariffs were quickly postponed or retracted when the stock market plummeted, the negative market reaction immediately reversed. Despite this whiplash chaos unfolding in financial markets, corporate quarterly earnings reports held firm, reminding traders of the underlying strength of the U.S. economy. Stocks staged one of the fastest V-shaped recoveries in recent memory. By late June, the major indices had reclaimed their highs and were setting new records. Investors who panicked and sold in April missed one of the sharpest rebounds in decades. Those investors who stayed the course were rewarded, although many small businesses, typically the backbone of job growth, were irreparably damaged. The dramatic decrease in immigration has likely softened what otherwise might have been a notable rise in unemployment as these businesses failed.

Artificial intelligence and the announcements of massive investments in data center infrastructure to support its build-out continued to dominate the narrative. Technology and communication services led all sectors, with semiconductor companies and any company involved in AI infrastructure posting impressive gains. Nvidia crossed the five trillion-dollar market capitalization threshold in October — a feat that seemed unimaginable just a few years ago. The market moved from asking whether AI is real to worrying about overbuilding and over-leveraging. Companies that delivered plausible answers to these concerns were rewarded; those that didn’t were penalized by investors.

The Federal Reserve navigated a tricky path in 2025. After holding rates steady through the first half of the year, the central bank began cutting them in September; three quarter-point reductions finished the year with a target range of 3.5 to 3.75 percent. The December meeting was contentious, with three dissenting votes reflecting genuine disagreement about whether inflation had cooled enough to justify continued easing. Fed Chair Jerome Powell acknowledged it was a “close call.” He positioned the Fed to wait and see how the economy evolves in 2026.

Expect fewer cuts ahead, even with a soon-to-be-appointed new Fed Chair (Powell, much publicly maligned by Trump, was appointed by him). Even if the new chair will likely have promised Trump rate cuts, he (currently, there are no women in contention) will have to convince a majority of the Federal Open Market Committee (FOMC) members to vote in favor of cuts, and they include regional Federal Reserve bank presidents.

Additional rate cuts are less likely in the near term if the economy continues to be more resilient than many predicted. In 2025, GDP grew modestly, unemployment ticked up slightly but remained historically low, and consumer spending held firm despite tariff-related price pressures. The soft landing that seemed improbable a year ago so far appears to have materialized, with the “wealth effect” of increased retirement and investment account balances encouraging consumers to continue to spend.

In 2026, stock valuations are elevated. The S&P 500 is trading at roughly 22 times forward earnings — a level we have seen only a few times in history. Wall Street strategists project modest gains, with most targets clustering around 7,500 to 7,700 for the S&P by year-end. Since the era of easy Fed cuts seems to be ending, corporate earnings will need to continue to do the heavy lifting, as they did in 2025.

The AI theme will evolve from infrastructure build-out to practical application. Companies that can get new data centers up and running, and operators that can demonstrate real productivity gains from AI will be rewarded. Those selling picks and shovels to the gold rush may find the easy money has been made — or at least already announced. The ability to access power to run these massive new productivity centers is likely to be a constraint on their rate of growth. As always, the market will sort winners from pretenders.

Geopolitical risks remain elevated. Trade policy continues to create uncertainty. Energy markets face conflicting pressures from oversupply and regional instability. These are not reasons to flee equities, but they are reasons to maintain appropriate diversification. Invest for the long term. Stay diversified across sectors and market capitalizations. Do not try to time the market based on headlines. The April sell-off taught us that the investors who kept their heads ended the year with solid gains. Interestingly, this time retail investors largely were the ones who stayed the course and bought the dip, while the algorithms widely deployed on Wall Street drove the market down.

There is a lesson here worth repeating: the market hates uncertainty, but it adapts faster than we expect. Time and again, we see that the cost of being out of the market during recoveries far exceeds the pain of riding through corrections.

Will 2026 be another year of double-digit returns? It is an election year, and incumbent politicians like to use the fiscal purse to get reelected. It’s especially important this year with consumers feeling the pinch of tariff-induced price increases for food and consumer staples. We will be seeing fiscal stimulus take effect shortly with accelerated depreciation tax deductions and tax refunds for individuals resulting from the One Big Beautiful Bill Act passed last July.

History tells us that over time, the market rewards patient investors who own quality companies with strong balance sheets and growing earnings. That principle has not changed. Nevertheless, be prepared for another unrivaled ride ahead.

William Rutherford is the founder and portfolio manager of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or wrutherford@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post 2025 was uncertain, unusual, unnerving, unprecedented, unimaginable | Opinion appeared first on Daily Journal of Commerce.

Sometimes the best action is no action at all. November tested that principle as traders whipsawed themselves trying to react to every headline, while long-term investors watched the show from the sidelines.

Looking at the scoreboard you would think nothing happened. The S&P 500 inched up 0.1 percent, the Dow gained 0.3 percent, and the Nasdaq slipped 1.5 percent. But anyone who lived through the month knows these numbers are like saying a roller coaster is flat because it ends where it started. The difference between those who traded every twist and those who held steady? The patient investors ended the month right where they started, without the transaction costs and stress.

The Federal Reserve cut rates by another quarter point on Oct. 29, bringing the federal funds rate down to 3.75-4 percent, with the committee split three ways. One member wanted a bigger cut; another wanted no cut at all. That kind of disagreement at the Fed is unusual, and it tells you something. Fed Chair Jerome Powell himself admitted at the press conference that there were “strongly differing views” about December, warning that another cut isn’t “a foregone conclusion.”

Here’s where it gets interesting. During the month we were still dealing with the longest government shutdown in history: 43 days from Oct. 1 to Nov. 12. Because federal statisticians were furloughed, we simply didn’t get an October jobs report. The November inflation data has been pushed to December. The Fed will walk into its December meeting partially blind, and so will investors. In 30 years of watching markets, we have never seen anything quite like it.

Yet beneath this uncertainty, corporate America kept churning out profits. With 95 percent of S&P 500 companies having reported third-quarter results, earnings grew 13.4 percent year over year. More than 80 percent of companies beat estimates, and profit margins expanded despite all the hand-wringing about tariffs and higher costs. That’s real earnings power, not speculation.

The month’s volatility was remarkable, even in this era of algorithms driving the markets. The S&P 500, from its late-October high, sold off nearly 6 percent at one point – the biggest pullback since spring – before clawing back to finish nearly flat. That pattern of fear surging and then receding is exactly what uncertainty looks like in market prices.

What’s fascinating is where the money went. For most of the year, the market’s gains have been carried by a handful of mega-cap tech names. The concentration got so extreme that just 10 stocks accounted for about 60 percent of the S&P 500’s year-to-date gains. By mid-November, only about 40 percent of S&P 500 stocks were trading above their 50-day moving average. That’s unusually narrow breadth for an index near its highs.

But November ended with something different. Health care, that unloved stepchild of the market, surged about 9 percent for its best month in years. Small-cap health care did even better, up closer to 10 percent. Regional banks, homebuilders, and industrials, all the sectors that had been left for dead, suddenly caught a bid. Meanwhile, the highfliers that led all year gave back gains as investors questioned whether AI capital spending had gotten ahead of itself.

This rotation makes sense. Throughout the month, analysts warned that AI-linked tech valuations were stretched, with growing debt financing of AI infrastructure creating conditions that could amplify any downturn. Bank of America’s fund manager survey found 45 percent of institutional investors naming an “AI bubble” as the biggest tail risk. When everyone’s worried about the same thing, the market has a way of surprising in the other direction.

The market’s speculative corners got hit hardest. While we don’t invest in cryptocurrencies, and rarely discuss them in this column, Bitcoin’s movement is worth noting as a sentiment indicator. It dropped 17.5 percent in November – its biggest monthly loss since March – from October highs around $126,000 to briefly touch $80,000. That’s what happens when sentiment shifts from greed to fear. The most leveraged bets unwind first, and crypto is often the canary in the speculative coal mine. Cryptocurrencies are often bought on margin – buyers borrowing against their stock portfolios who receive margin calls when the value of their collateral declines, thereby causing a downward spiral in stock prices until a level is reached that brings in stock buyers from the sidelines. Hence the link between demand for crypto and for stocks.

For investors, this is healthy. The market was getting frothy, with too much capital chasing too few AI stories. November’s rotation toward sectors with reasonable valuations and solid fundamentals suggests we might finally be broadening out from the narrow leadership that has dominated for so long. Health care offers demographic tailwinds, financials are positioned for a normalizing yield curve, and industrials benefit from reshoring trends.

Looking ahead, expect more of this tug-of-war. We’ll get a data dump this month when the shutdown-delayed reports finally hit. Markets will overreact to each release, trying to divine whether the Fed will cut again or pause. On some days growth stocks will lead; on other days value will shine.

The key is to not get whipsawed trying to trade every wiggle. The best opportunities come when everyone else is uncertain, and the worst mistakes come from reacting to headlines. Right now, you can find quality companies with real earnings, strong free cash flow, and sector tailwinds trading at reasonable valuations: health care companies developing new therapies; industrial firms benefiting from infrastructure spending; and financials that will profit as the yield curve normalizes.

The market hates uncertainty, but uncertainty creates opportunity. November reminded us that beneath the daily noise, there are real businesses generating real profits. Find companies with durable business models, structural tailwinds, and financial strength to weather volatility. Let the speculators chase the latest AI moon shot or crypto dream.

Remain calm when everyone else is panicking whether the Fed will cut by 25 basis points or stand pat. Traders try to game every Fed meeting and AI headline. Investors instead focus on companies that will be earning more five years from now than today. In the long run, earnings drive stock prices. November proved that yet again. Solid earnings supported the market even as sentiment swung wildly and traders tied themselves in knots.

Stay invested, stay diversified, and remember that volatility is the price of admission for long-term returns. November felt uncomfortable, but discomfort often precedes opportunity. That’s when patient investors remain positioned for another leg higher.

William Rutherford is the founder and portfolio manager of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or wrutherford@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post November’s sound and fury: all that noise for nothing | Opinion appeared first on Daily Journal of Commerce.

Never mind that the government couldn’t tell us whether we had jobs or inflation. The stock market powered straight through October’s data fog. The S&P 500 rose 2.3 percent for the month, the Nasdaq gained 4.7 percent, and the Dow added 2.5 percent, extending multi-month winning streaks for all three indices. Here’s the kicker: they did it while the U.S. Bureau of Labor Statistics posted a notice saying updates had stopped. Meanwhile, Treasury desks dusted off a rarely used TIPS fallback procedure in case the Consumer Price Index couldn’t be published on time — a reminder that markets sometimes must fly by instruments that have not been calibrated in years.

With the federal government shut down since Oct. 1, the U.S. Bureau of Economic Analysis, the BLS and the Census Bureau curtailed most releases, leaving investors to triangulate the economy with private indicators and stale prints. The October jobs report that normally drops the first Friday of the month could not be found. The CPI release got pushed back a week, and there were genuine concerns it might not be published at all if the shutdown persisted. For the first time in memory, the Federal Reserve had to make a rate decision essentially flying blind.

Against this backdrop of uncertainty, the Fed cut rates by 25 basis points to a range of 3.75-4 percent on Oct. 29, although Chair Jerome Powell made it crystal clear that another cut in December “isn’t a foregone conclusion; far from it.” As he said during the press conference: “What do you do if you’re driving in the fog? You slow down.” The vote itself tells you something about the lack of consensus: Stephen Miran wanted a bigger cut while Jeff Schmid wanted no cut at all. That’s what happens when you’re making monetary policy without your speedometer. The Fed also announced it would conclude its balance sheet runoff on Dec. 1, and again purchase maturing Treasurys, effectively halting quantitative tightening. Long yields hovered near 4 percent for much of October before wobbling after Powell’s cautious tone. The market hates uncertainty, but it hates the wrong certainty even more.

While Washington couldn’t count jobs, Big Tech kept counting money. The earnings parade was something to behold, with Amazon’s report serving as the month’s exclamation point. The stock soared nearly 10 percent after the company reported 20 percent year-over-year growth in Amazon Web Services revenues. Amazon said it would spend $125 billion on AI infrastructure this year and maybe more next year. Major tech providers are rapidly monetizing new computing capacity as quickly as possible. The unmet demand for computing power to operate AI models suggests that current capital expenditure investments by these companies are likely to be sound.

The tech giants’ numbers are staggering. Alphabet, Meta, Microsoft and Amazon by the end of 2026 collectively expect to spend over $490 billion on AI and infrastructure investments. To put that in perspective, that’s equivalent to the GDP of Singapore, an Asian economic powerhouse, and more than the GDPs of Greece, Portugal and New Zealand combined. These companies are building the digital infrastructure for a complete transformation of how the world functions, and investors are buying the story wholesale.

Nvidia, riding this wave of unprecedented investment, on Oct. 29 became the first company to close above a $5 trillion market cap. The AI infrastructure boom isn’t slowing down; if anything, it’s accelerating. And it is solidly U.S.-based, although China is nipping at our heels.

Not everything in October was sunshine and semiconductor sales. Jamie Dimon offered a memorable warning after JPMorgan Chase took a $170 million hit from subprime auto lender Tricolor’s bankruptcy: “I probably shouldn’t say this, but when you see one cockroach, there are probably more.” First Brands, a privately owned auto parts supplier, filed for Chapter 11 with as much as $2.3 billion in loans outstanding. These do not appear to be systemic risks yet, but as Dimon noted, “We’ve had a credit bull market since 2010. These are early signs there might be some excess out there.” Private credit has grown from a cottage industry to a $2 trillion market, and nobody really knows what’s lurking in those portfolios.

One of October’s quieter stories was the improvement in market breadth. The equal weight S&P 500 outperformed the cap weighted index for stretches of the month. Cyclicals joined the party, regional banks found their footing despite credit concerns, and the Russell 2000 showed signs of life. When participation broadens, rallies tend to have staying power. This rotation from the narrow leadership that defined much of the year could be healthy, assuming it reflects genuine economic strength rather than just position shuffling. Yet the Magnificent Seven stocks still drive the market, as they represented over 37 percent of the S&P 500’s market cap at the end of October.

The market’s ability to advance through October’s uncertainty is impressive but not unprecedented. Markets are forward-looking machines, and right now they’re looking past the shutdown, past the data drought, and toward an AI-powered future that Big Tech insists will transform everything.

For the long-term investor, October reinforced several timeless principles. Stay diversified across broad U.S. equities, rather than crowding into a handful of winners. October’s breadth improvement is healthy, but don’t chase last month’s winners. The Russell 2000 might be stirring, but small caps remain vulnerable if credit tightens. Focus on quality companies with strong balance sheets, recurring revenues, and robust cash flow generation. When you can’t see the road ahead, you want businesses with proven models and experienced management teams. Consider maintaining a balance between growth-oriented holdings that can benefit from technological transformation and companies with proven steady returns through market cycles.

Most importantly, avoid opacity in your investments. If you don’t understand how a company makes money or how leveraged it is, pass. First Brands had “off balance sheet financing.” Tricolor made subprime auto loans. Neither ended well. In times like these, business model clarity and balance sheet transparency matter more than growth projections or AI promises. Look for companies generating free cash flow today, not just promises of profitability tomorrow.

October proved the market can climb in the dark, but that doesn’t mean you should close your eyes. The data will return, the fog will lift, and those who stayed fully invested in quality equities will be glad they did. History shows that time in the market beats timing the market, and October was just another reminder that the market can surprisingly rise, even when conditions seem uncertain. In a world where one company can be worth $5 trillion, while the government can’t count jobs, the old rules still apply: stay invested in equities, diversify broadly across sectors and market caps, focus on quality businesses with strong cash flows, and keep your lights on to watch for the occasional pothole. After all, sometimes the best visibility comes not from having all the data but from having the discipline to stick to proven principles when the data disappears.

William Rutherford is the founder and portfolio manager of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or wrutherford@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post Driving through data fog: markets shrug off blind spots | Opinion appeared first on Daily Journal of Commerce.