February 2026 Investment Update
Getting It Less Wrong:
What Weather Forecasting Can Teach Us About Investing
If you live in the Greensboro area, you’ve likely experienced the same frustration we have over the past two weeks: checking the weather forecast, planning accordingly, and then watching as Mother Nature had entirely different plans.
One forecast called for a dusting of snow. We got six inches. Another predicted warming trends. Temperatures plummeted instead. The meteorologists weren’t incompetent. They were working with the best models and data available. But weather, like markets, is a complex system influenced by countless variables that can shift without warning.
Here’s what struck us about those missed forecasts: The goal of weather forecasting isn’t perfection. It’s about getting it less wrong.
And that same principle applies to investment management.
The Forecast We Can’t Make (and Don’t Try To)
Weather forecasters use sophisticated models to predict conditions. Investment managers use data and indicators to guide positioning. But in both cases, the objective isn’t to predict with certainty. It’s to prepare appropriately based on available information.
We don’t claim to know whether markets will “snow” or “shine” in the weeks ahead. What we can do is position portfolios to be appropriately dressed for the conditions we’re observing right now.
Several months ago, well before the recent market volatility, our systematic indicators began pointing us toward more defensive positioning. We didn’t make those adjustments because we predicted a correction. We made them because our process indicated it was the prudent step at that time, based on observable market conditions.
Think of it like seeing storm clouds forming and bringing an umbrella. You’re not predicting rain with certainty. You’re responding proactively to signals that suggest preparation makes sense.
When “Getting It Less Wrong” Pays Off
Those earlier defensive adjustments, made when markets still felt relatively calm, have proven valuable during recent volatility. By leaning into more defensive sectors and reducing exposure to higher-risk areas, portfolios were better positioned when conditions shifted.
This is exactly how our systematic approach is designed to work. We don’t react to headlines or attempt to time market turns. We follow objective indicators that guide appropriate risk positioning based on what the data shows us, not what we think might happen next.
The result? We reduced portfolio risk while maintaining participation in market opportunities. In an ideal world, you’d always want to take on less risk without sacrificing returns. That’s rarely possible. But when your process guides you there systematically rather than reactively, it can happen.
Market Recap
January: When the Forecast Surprises You
January delivered something that caught many by surprise: continued strength across major indices, with small-cap stocks leading the charge.
After a strong finish to 2025, markets didn’t pause for reflection. Instead, they carried momentum into the new year, with the Russell 2000 jumping 7.9% and large-cap indices posting solid gains as well. For investors who had expected a breather after 2025’s rally, January served as a reminder that markets don’t always follow the script we anticipate.
This is where the weather forecast analogy becomes particularly relevant. Just as meteorologists can call for storms that never materialize, market watchers often anticipate corrections that don’t arrive on schedule. The key isn’t predicting perfectly. It’s being positioned appropriately for multiple scenarios.
Several themes emerged throughout the month:
- Small-cap stocks outperformed dramatically, suggesting renewed investor confidence in domestic growth and smaller companies.
- The Federal Reserve maintained its measured approach, providing markets with continued clarity on the path forward.
- Corporate earnings continued to show resilience, supporting valuations even as some questioned whether stocks had run too far.
- Investor sentiment remained constructive, with risk appetite holding firm despite ongoing debates about valuation levels.
January reinforced an important lesson: markets can remain strong longer than expectations suggest they should. Timing exits based on feelings of “overvaluation” or predictions of “inevitable pullbacks” can mean missing continued gains.
Hamlin, J. (2026, January 26). Stock market news today: Dow, S&P 500 rise as stocks look to build on January rebound. Yahoo Finance. https://finance.yahoo.com/news/stock-market-news-jan-26-125100159.html
Portfolio Positioning:
When Preparation Meets Opportunity
In January, we did not make any allocation changes. And there’s an important story in that decision.
Several months ago, our systematic indicators guided us toward more defensive positioning. We increased allocations to more stable, defensive sectors while maintaining appropriate market exposure. At the time, these adjustments were based purely on what the data was showing us, not on predictions about what markets would do next.
Then January happened. And those earlier adjustments demonstrated their value.
By positioning portfolios more defensively months ago, we were able to participate in January’s market strength while carrying less overall portfolio risk. This is the ideal outcome: maintaining upside participation while reducing downside exposure.
Think back to our weather forecast analogy. When you check the forecast and see variable conditions ahead, you don’t cancel your plans. You dress in layers. You bring what you might need. You prepare for multiple scenarios. That way, whether the day turns out sunny or stormy, you’re appropriately equipped.
Our defensive positioning worked the same way in January. We weren’t hiding from markets or attempting to avoid risk entirely. We were navigating them with appropriate preparation based on observable conditions.
This is exactly what “getting it less wrong” means in practice. It’s not about perfectly predicting what any single month will bring. It’s about positioning portfolios to perform well across a range of potential outcomes, managing risk thoughtfully while maintaining meaningful market participation.
The adjustments made previously remain in place:
Core Allocations
- Diversified large-cap U.S. equities
- Fixed income aligned with your risk profile
Defensive Changes
- Reduced exposure to higher-volatility areas
- Added exposure to Consumer Staples and a low volatility index
Areas of Emphasis
- Continued focus in Healthcare and Biotech
Our indicators will tell us when it’s time to adjust. Until then, staying disciplined means maintaining our positioning based on systematic signals, not chasing short-term momentum or reacting to a single month’s results.
The Three Questions We’re Always Asking
Rather than trying to predict what markets will do next, we focus on three fundamental questions that guide our positioning:
What are current market conditions telling us?
We don’t rely on opinions or gut feelings. We look at objective indicators: valuations, momentum, market breadth, volatility patterns, and sector relationships.
How much risk are we taking relative to potential return?
Risk isn’t just about volatility. It’s about the asymmetry between what you might gain and what you might lose. Our process constantly evaluates whether we’re being appropriately compensated for the risks we’re taking.
Has anything changed that warrants an adjustment?
Markets evolve. When our indicators signal a meaningful shift in conditions, we respond. When they don’t, we stay patient. This month, our indicators continue to support the defensive positioning we’ve held, so we’re maintaining course.
What This Means for Your Portfolio
The defensive positioning we’ve maintained has helped manage risk during recent volatility. But it’s important to remember that “defensive” doesn’t mean “risk-free” or “market-proof.”
Markets can still decline. Portfolios can still experience losses. What defensive positioning does is reduce exposure to the most volatile areas while maintaining meaningful participation in market opportunity.
Think of it like this: When weather forecasts call for storms, you don’t stay inside forever. You bring appropriate gear and adjust your plans accordingly. Our investment approach works the same way. We’re not avoiding markets, we’re navigating them with appropriate preparation.
Looking Ahead: Staying Grounded
January reminded us that market conditions can shift quickly and that staying disciplined through volatility is easier said than done. But this is exactly when the process matters most.
We don’t know what February or the months ahead will bring. What we do know is that our systematic indicators will continue to guide positioning, and we’ll make adjustments when the data warrants them, not when headlines demand them.
Markets change. Conditions evolve. Uncertainty is constant.
What doesn’t change is the value of staying anchored to a disciplined, systematic approach that prioritizes getting it less wrong over trying to be perfectly right.
As always, our focus remains on helping you stay aligned with your long-term goals rather than reacting to short-term noise. We’ll continue monitoring conditions, evaluating what the data tells us, and making adjustments when appropriate: calmly and deliberately.
Thank you for your continued trust. If you have questions or would like to discuss how any of this fits into your personal plan, we’re always here.
The opinions expressed are those of Strategic Advisory Partners, who reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. There is no guarantee that their assessment of investments will be accurate. This material is for informational purposes only and should not be construed as investment advice. Past performance is not indicative of future results. All investing involves risk, including the loss of principal, and there can be no guarantee that investment objectives will be met.
