​The most encouraging observation we can make about recent market activity is its surprising resilience. Despite facing significant headwinds, major equity markets have not given up more ground. Most indices have now slipped into the red for the year, with the S&P 500 marking its fifth consecutive weekly decline, now sitting on the precipice of a 10% correction from recent highs.

We often find ourselves asking: where do we even begin? Distilling the current global landscape into a cohesive narrative is becoming an increasingly complex task. We appear to be living in a "choose your own adventure" reality where a sense of shared truth has evaporated. Yet, remarkably, so far markets have been relatively resilient. Markets are either acting as the ultimate efficient arbiters of truth or are gripped by a profound case of cognitive dissonance. At StraightLine, our investment philosophy remains focused on a core objective: positioning for a wide spectrum of potential outcomes.
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For the decade following the 2008 financial crisis, a standard US-centric allocation was the undisputed winning strategy. In that environment, looking beyond domestic borders often felt unnecessary. However, the post-pandemic landscape has shattered that narrative. We are witnessing a structural return to broad-based diversification - one that integrates non-US assets, commodities, and alternative strategies, alongside a more tactical use of cash. As the global order evolves, we believe that a multi-asset approach is no longer optional; it is the most reliable tool for generating resilient long-term outcomes.

As if there was not enough already happening, markets now have to contend with the conflict in Iran. Over the weekend, the US and Israel struck Iranian leadership and military sites, creating a new wrinkle for investors to consider. Thus far, the market reaction seems to be measured. As of this writing, equity markets are taking the news in stride, while oil and gold prices are unsurprisingly higher. ​

On the surface, markets continue to produce decent returns, but the story of the year thus far remains the high levels of dispersion among S&P 500 stocks. The chart from Bespoke below highlights this dispersion. Through 2/17 more stocks were either up or down by more than 20% than those that were up/down by 5%. One would think that this will ultimately resolve itself one way or the other. During more normal times, we might be a little more concerned about the extreme moves for some of these stocks, but then, there is nothing normal about these times. ​

Markets were mixed last week, but the real story to start 2026 requires a deeper inspection of a key emerging trend. Although at the broad index level, markets appear to be doing reasonably well, under the surface, the movements seem a bit more precarious. The biggest news recently has been the bloodbath in software stocks, as AI’s continued evolution threatens the once-perceived moats of many software companies. ​

​Markets have started the new year on a strong note, led by small-cap stocks. It is still very early, but the recent performance, first of international equities, and now small caps, is an encouraging sign. A much-anticipated broadening of returns, away from the usual leadership, is a positive development for stock markets and is something investors should be watching.

​Stock markets came roaring back last week, enough to eke out a small gain for November. The bubble fears seem to be abating, while there seems to be an increasing likelihood of another Fed rate cut this month. The ongoing sluggishness in labor data has investors and some Fed officials feeling as though another rate cut is needed.