Markets at all-time highs, layoffs in the headlines, recession fears everywhere. Here’s why you don’t bail — you upgrade your discipline.
KET TAKEAWAYS
Markets are at all-time highs, but sentiment feels like crisis, which is exactly why people are tempted to panic-sell
Staying invested over time wins, but staying invested is not the same as being lazy
Your edge is not timing the market, it’s sizing and conviction: trim the weak names, lean into the durable ones
Cash feels safe but it won’t build long-term security the way disciplined equity exposure will
You don’t need to predict the next storm, you need to build a portfolio that can survive one
MY HOT TAKES
Fear is the real risk factor right now, not tariffs or AI layoffs
The “sell everything now and get back in later” fantasy is how normal people accidentally retire poor
Conviction without review is just stubbornness in disguise
It’s totally fine to shrink speculative bets–that’s not cowardice, that’s risk management
The only investors who truly blow up are the ones who jump off the boat in rough water
You can quote me: “Panicking out of the market right now is not risk management, it’s self-sabotage.”
Manic panic. Inflation may not be as bad as we all thought. The Fed is cutting interest rates. President Trump is about to meet with President Xi–trade tensions may be easing. Fiscal stimulus from the One Big Beautiful Bill act is about to add some juice to growth. Earnings season has been pretty good so far, even exceeding my 8% EPS growth target (through 6:00 AM this morning 15% aggregate YoY EPS growth). Everyone’s favorite Mag-7 megacaps are going to announce earnings this week and they are likely to remind us all that AI is not just a fad. The naughty guys and gals in Congress will eventually start to play nice; even they will soon get bored with doing nothing. Are you surprised that the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite Index all closed at all-time highs? Of course, you’re not. BUT YOU ARE NOT CELEBRATING, are you? 🤢 No, you, like me–like the rest of us are really nervous.
You might remember your investment portfolio getting smashed under similar circumstances back in 2008. Now you can’t avoid reading headlines about an “AI Bubble” or a “Hidden Credit Crisis.” People keep telling you that everything is alright, but you go to the grocery store, and your bill is outright ridiculous. The average price of an automobile in the US just topped $50k for the first time. Last week, Target announced that it was going to lay off 1000 corporate employees and eliminate 800 unfilled positions. You know that tariffs are out there, and you know that tariffs have to be paid by someone–either the companies in your portfolio or… you, but we haven’t seen it yet, which makes it even more stressful; it might pop up at the worst time. Yesterday afternoon, CNBC reported that everyone’s favorite company Amazon–the 2nd largest employer in the US, behind Walmart–is going to announce that it will be laying off 30,000 workers. That was the headline last night. By this morning, there are lots of other numbers floating about, none of them small. The company has not made an official announcement yet but the world–including you and me–suspect that AI-efficiency may have something to do with it. This could just be the tip of the iceberg.
We have no real data to look at–we haven’t since the government shutdown put the kibosh on economic releases. But we remember back when we were getting numbers… well, they weren’t good at all. Many smart folks–like my friends at Bloomberg Economics–have been pulling state-level jobs data, and unfortunately, that data confirms what we already know, the labor market is getting a bit shaky. Will it continue? Will the AI bubble pop? Will this be another “Great Recession” that will cost me my retirement savings? YOU ARE NOT THE ONLY ONE GETTING TIGHTNESS IN YOUR CHEST RIGHT NOW. I have been receiving lots of calls from clients and friends wondering if they should simply sell everything. Take profits and hide under a rock until the asteroid hits. So, the big question is HOW DO I INVEST IN A RECESSION?
My friends, it’s the old fight-or-flight instinct. It hits right around the moment you open your brokerage app and see the market up another 2%… yet somehow, you don’t feel richer. You feel… um, suspicious. You know enough history to understand that the market doesn’t give without taking something back. But here’s the thing: that fear, that tension, that whisper in your ear telling you to “do something” is the exact emotion that destroys portfolios over the long run. Every major market correction has been followed, not preceded, by an explosion of regret from those who sold too soon. The S&P 500 has endured world wars, oil embargoes, terrorist attacks, global pandemics, and whatever it is we’re calling this era of tariffs, AI, and political theater, and yet, it has compounded wealth over time at roughly 10% a year. Not linearly, not comfortably, but consistently!
The data is painfully clear: staying invested wins. Always! The problem is that it doesn’t feel like winning while it’s happening. It feels like swimming in open water with no buoy in sight, like the tides might drag you under before you ever see the finish line. The short-term waves–whether they’re interest rate hikes, trade wars, government shutdowns, or the latest AI layoffs–are meant to test your conviction (sorry, I can’t get the swimming theme out of my mind 😉). And conviction is what separates an investor from a gambler.
I’ve seen this movie too many times. People panic, sell into weakness, and then spend years waiting for the “right” time to get back in–usually after the market has already made new highs. It’s never the headlines that ruin portfolios. No! It’s the human reaction to them. Investors love to say they’re “long-term,” right up until the moment the market tests that theory. Then they become day traders, economists, and doomsday preppers all in one.
The truth is that staying invested doesn’t mean staying lazy. It means staying smart. It means accepting that volatility is the price of admission for the privilege of compounding. It means realizing that the market doesn’t reward courage, it rewards patience that looks like courage in hindsight. Go on, read that sentence again. But patience doesn’t mean inaction. It means sharpening your pencil. It means re-evaluating what you own and why. It means separating the companies that have real earnings power and sustainable growth from those that are simply riding a trend or a narrative. I can’t stress this enough! I am on record all over the internet–in my notes, on my TV appearances, in my YouTube videos; check your theses constantly, especially when things are feeling weird.
This is where most investors get it wrong. They confuse conviction with stubbornness. Conviction is believing in your thesis after doing the work. Stubbornness is refusing to see the data when it changes. If you’ve got companies in your portfolio that are built on hope rather than cash flow, this is the time to trim, not torch the whole house. High-quality businesses with pricing power, clean balance sheets, and proven adaptability tend to outperform over long periods, not because they’re flashy, but because they survive.
The temptation to “wait it out” in cash feels safe right now. After all, you can earn 3.8% in a Treasury bill and sleep at night. But safety is not the same as security. Safety feels good; security is good. Over ten years, that 4% won’t even keep pace with inflation and taxes! Meanwhile, the equity market will be busy grinding higher, sometimes quietly, sometimes violently–but always persistently. The rally you fear missing is already being built on the days you’re afraid to look at your screen.
I get it. There’s a certain logic in saying, “Let’s wait until things settle down.” But that’s the investor’s equivalent of saying, “I’ll go to the gym when I’m in shape.” 🤣 The market doesn’t wait for comfort. It moves when uncertainty is at its peak, when headlines are ugly, when social media is screaming “bubble,” and when CNBC’s lower third reads “Markets in Turmoil.” That’s when the long-term returns are forged.
If you need proof, look back at every five-year window after a major selloff. Investors who stayed in–or better yet, rebalanced/adjusted into weakness–always ended up ahead. Those who exited to avoid pain missed the recovery and compounded their loss by missing the rebound. It’s the cruelest trick in markets: the hardest times to buy are the best times to buy, and the easiest times to buy are usually the worst.
Check out this really cool chart I pulled from Ycharts. It shows trailing 5-year returns from holding the S&P 500. You can see that even when 💩was hitting the fan in 2022, you were still up over 40% in 5 years. If you got cold feet and took your profits in the past 5 years, you would be missing out on almost 100% profits for the past 5 years. I promise that I will recreate a longer-term one the second I have a chance.
But wait, being “in” doesn’t necessarily mean being indiscriminate. There’s a difference between staying invested and staying invested intelligently. 🤓 You don’t need to hold every name with equal weight. You don’t need to ride your speculative positions like they are untouchables. The long-term investor’s edge isn’t in timing the market, it’s in knowing what deserves conviction and what deserves pruning.
That’s where homework comes in. In this environment, where interest rates are adjusting, the fiscal spigot is open, and the Fed is playing a careful balancing act, you need to know which of your holdings can thrive under multiple scenarios. Which companies can raise prices without losing customers? Which can manage debt if rates tick higher again? Which can pivot when technology disrupts their model? And which are just hoping the next quarter’s AI mention will distract investors from reality?
Sharpen your pencil. ✏️ Write down your thesis for each holding. Ask yourself, “Would I buy this again today?” If the answer is no, that’s a clue. If the answer is yes, then add to it. Rebalance. Review. But don’t retreat. The market rewards those who evolve with it, not those who run from it.
You don’t need to time perfection. You need to manage imperfection. Long-term investing isn’t a one-size-fits-all, buy-and-forget fantasy. It’s a discipline of continuous improvement. The edge belongs to those who adjust position sizes, manage risk, and stay intellectually honest.
Think about the investors who stayed the course through 2008. It wasn’t easy. Their portfolios were down 30%-40%, the news was apocalyptic, and cash felt like the only rational choice. But the S&P doubled in the next five years. Then it doubled again. Those who left the table missed one of the greatest wealth creation periods in history, all because they confused discomfort with danger.
My friends, today’s market is no different. Yes, we have inflation hangovers, tariff uncertainty, and technological disruption. But we also have innovation, productivity growth, and fiscal expansion. Every economic cycle creates new winners and buries old ones. Your job isn’t to predict which it will be. Your job is to position yourself so that whichever outcome unfolds, you’re still in the game. That’s what staying invested really means. It’s not blind faith, it’s strategic endurance. It’s saying, “I know storms come, but I’m not selling the boat because of rough seas.” You trim the sails, you adjust your course, but you keep sailing. The only people who drown in markets are the ones who jump overboard when it gets rough.
So, as you stare at the headlines about layoffs, tariffs, and debt ceilings, remember this: markets climb walls of worry, not walls of certainty. When everyone agrees that things are safe, the opportunity is already gone–it’s too late. What matters now is not whether you feel good, it’s whether your plan is good.
The call from your gut to sell everything is really a call to understand everything. Look at your portfolio the way a coach looks at a team. Some players are stars, some are role players, and some need to be benched. You don’t send the entire team home; you make adjustments. That’s how you make it to the finals. Sorry for the sports analogy…but you know, World Series, upcoming World Cup–they are swirling about.
Because this game doesn’t reward those who time the final whistle, it rewards those who play every quarter. Long-term always wins because time is the only advantage that never runs out, unless you surrender it. So don’t get out. Get smart. Recheck your assumptions, resize your risk, and stay in motion.
The best investors I know don’t try to predict the next storm; they build boats that can handle them. The worst ones stand on the dock waiting for calm seas that never come. The difference between the two isn’t intelligence. It’s discipline. The market will do what it always does: test your patience, flit your nose at your fear, and then reward your endurance.
So let the Fed cut, let politicians rant, let gold fly, let the headlines scream. You can’t control any of that. What you can control is how you react, how you allocate, and how you think. The market isn’t asking for your heroism, it’s asking for your homework. A simple ask.
Stay in. Stay sharp. Don’t get out–get smart.
YESTERDAY’S MARKETS
Stocks leaped to record highs in the wake of Friday’s benign inflation data and productive weekend trade talks between the US and China. Gold bulls finally got to rest as it pulled back below $4000. 10-year Treasury note yields retreated below 4% once again.
NEXT UP
The big bankers get together for coffee, cookies, and economics presentations. 🥱Don’t get too excited, we won’t know what policy is until tomorrow afternoon. Come on, stay awake! 💥
FHFA House Price Index (August) may have slipped by 0.1% for the second straight month.
Case-Shiller 20-city Home Prices (August) probably climbed by 1.3% YoY, after showing a 1.82% gain in the prior month.
Conference Board Consumer Confidence (October) is expected to have slipped to 93.4 from 94.2.
Important earnings today: UPS, PayPal, Wayfair, UnitedHealth, Ares, VF Corp, Royal Caribbean Cruises, Zebra Technologies, JetBlue, Regeneron, American Tower, NextEra Energy, Booking Holdings, Mondelez, Visa, and Enphase Energy.