September 2nd, 2025: Staying Disciplined: Trading on Facts, Not Headlines

AT THE BEGINNING OF THIS WEEK:

The market opened this week to the downside. This sets one of our data points that matters until Friday when we get an end-of-week data point. And despite all the machinations of speculations about all the political and economic gyrations going on... none of that really matters to us and the client capital that we manage.

It is fascinating to me that we all are constantly bombarded with headlines like, "What investors need to know..." or "Tuesday's big analyst calls..." or "My #1 Stock for 2025... " or "Dow falls 500 points on tariff worries..." or "XYZ shares sink as it cuts guidance..." or "What should concern investors going into this tough month..." or "Morgan Stanley downgrades XYZ, sees challenging setup in 2026..." or "UBS calls XYZ significantly underappreciated...".

Let me interpret all of the above and any forecast, analyst opinion, upgrade or downgrade or speculation of any kind having anything to do with the future of the stock market... it is all... 100%... nothing more than guessing. When an engineer designs an 8-lane interstate bridge across a mile-wide chasm, there is zero speculation or guessing. People's lives depend on the fact that the engineering of massive structures is never built on guessing, hoping or assuming. While the engineer has to speculate on the amount of traffic on that bridge in the future, you can count on the fact that the engineer loaded that bridge with bumper-to-bumper fully-loaded 18-wheelers and then added more on top when the columns and supports were tested before the first yard of concrete was poured.

The money you have in the market should never be governed by or managed by speculation, guessing, hoping, opinions or assumptions. I know... the world thinks you have to know all of that what-if stuff in order to make "an informed and intelligent" decision about what to buy and when to sell. But what that really means is, if you believe that, you have been brainwashed into thinking that anyone can consistently know what the market is going to do in the future. You cannot. No one can. The fact is (and this is a mathematical fact) the current trend in the market will last exactly until it doesn't. Everyone knows this fact, but very few actually use this fact to grow and protect their capital.

Last Thursday, we do what we always do on the day before the last day of the trading week when we are in cash... we speculate... we guess... we hypothesize... we make assumptions... we look at all the data we have at our disposal and made an assumption about what we will likely do on the last trading day of the week when we have 100% of the historical data that we need to make a trading decision. We 'guessed' that we would 'probably' see the weekending data confirm that it is time to get back into the market. It was that close. So... in anticipation of that likely move, we got ready to buy and part of that preparation requires us to be 100% in cash so that we can put all of the capital in play when we buy. As such, we moved out of our money markets late on the day on Thursday so that we could go all in on Friday.

Friday arrived and we looked at the data toward the end of the day when we have all the data for the week and all the trends. We knew the score on the momentum. We knew the score on our Buy/Sell Pressure. We knew the score on our Market Volatility. We knew where the market was and how it was positioned against all of our metrics... and guess what? The results clearly indicated we were to stay out of the market for at least one more week and we put all capital back into money markets.

Bottom-Line... Our speculations on Thursday were just guesses. Educated guesses, but not something we trade on. We trade on mathematical facts... AFTER we have all the HISTORICAL data. Nothing in our data told us that the market was going to take it on the chin today. The only thing our data told us on Friday was, the market was not strong enough to support getting back in. Was that math correct? Absolutely! Remember... all our math is supposed to tell us is where the market is and how it got there. It does not tell us what the market is going to do in the future. Our rules and our data (much like an engineer's rules and data) merely told us that the risk was too high to get back into the market last Friday. Not the risk about the future. The risk at that particular time. Last Friday, the risk was too high to get into the market on the long side and far too risky to get into the market on the short side... so what was the logical conclusion? Hold money markets at least until the following Friday.

Let me leave you with one final thought... think about the amount of stress in your life that would simply go away if you didn't have to worry about headlines, forecasts and financial speculations... at least for your stock market investment capital. If you are a client of ours, we are delighted to be able to remove at least some of that stress from your life... If you are not a client of ours, now is the perfect time to take a stress-reduction pill and reply to this email. We'll get in touch quickly and get you on the path to far more stress-free life.

Have a great week!

THE NOISE:

Alex Goodwin, Vice President

The indexes ended last week on the defensive after reaching fresh all-time highs earlier in the week. Both the S&P 500 and Nasdaq fell back on Friday, with the Nasdaq leading losses at -1.16% while the S&P 500 faired marginally better, losing -.6%. Their weekly losses were slim at -.27% and -.04% respectively.

The selloff came after the Fed’s preferred inflation gauge, the PCE Index, showed prices holding above the 2% target and tariffs beginning to creep into consumer costs. That reminder of sticky inflation, paired with the expiration of the “de minimise” import exemption on sub-$800 packages sparked concerns that tariff-driven costs would keep upward pressure on prices.

Technology stocks shouldered much of the pressure. Dell dropped nearly 9% after issuing disappointing profit guidance despite beating quarterly earnings expectations. Marvell collapsed almost 19% on a weak sales outlook, rattling the semiconductor sector, while NVIDIA slipped more than 3% on lingering worries about its exposure to China.

Investor sentiment may also have been influenced by the broader macro backdrop. After a week of record closes, Friday’s retreat could have been a round of profit-taking ahead of the long holiday weekend and the release of key labor market data. August still marked the fourth consecutive monthly gain for the S&P 500.

This morning, U.S. stocks opened sharply lower—S&P 500 and Nasdaq each slipped over 1%—as a broad sell-off in global bonds propelled Treasury yields higher (10-year yield climbed above 4.27%), elevating concerns over fiscal stress and Fed independence. Investors are also digesting the weekend tariff news, which once again has introduced a round of uncertainty regarding trade policy. So, with a busy next couple of weeks ahead, we will continue to let the data govern our investment decisions.