When History Becomes a Less Reliable Guide.
Markets finished 2025 at or near record highs, but the underlying signals were anything but straightforward. Our year-end letter looks beyond headline index returns to examine a market shaped by sharp crosscurrents—strong performance, uneven leadership, and investor behavior that often appeared out of sync with the broader economic backdrop.
A central theme of the letter is sentiment. Historically, deeply depressed consumer confidence has tended to be constructive for long-term investors, often appearing near market lows and periods of improving forward returns. Today, however, the backdrop is more complicated. We are not aware of a modern period in which consumer sentiment has remained this weak while equity markets have continued to advance for a prolonged stretch—making it difficult to rely on history alone as a guide.
Adding another layer of complexity, the American Association of Individual Investors sentiment survey shows a sharp rise in bullishness, a measure many investors view as a contrarian indicator. The coexistence of deeply negative consumer sentiment, rising investor optimism, and elevated market levels creates a setup that resists simple interpretation.
The letter examines what this unusual combination may be signaling about expectations, risk, and opportunity as investors look ahead.
Click here to read the letter in its entirety.
