January 2026 Investment Update
Is the World Changing… or
Are We Due for a Market Correction?
As we turn the calendar to a new year, it’s natural to pause and take stock, not just of where markets have been, but of what may lie ahead.
During a recent internal conversation, our Chief Investment Officer posed a question that stuck with us:
“Is the world changing… or are we simply due for a market correction?”
It’s a simple question, but an important one. And it’s a helpful way to frame the conversation as we enter 2026 after a strong and, at times, perplexing stretch for markets.
Market Recap
A Year That Tested Conviction
As 2025 came to a close, markets continued to reward patience and discipline. What began as a year marked by uncertainty ultimately evolved into one defined by adaptation and resilience. December reinforced that narrative, with equity markets holding onto gains and investor sentiment remaining constructive despite ongoing questions around valuation, growth, and policy.
Throughout the year, markets adjusted to a shifting economic backdrop rather than reacting sharply to it. By year end, the S&P 500, Nasdaq, and Dow had each delivered solid gains, reflecting confidence in corporate earnings, moderating inflation, and a clearer understanding of the Federal Reserve’s longer-term direction.
Several themes continued to influence markets as the year wrapped up:
- The Federal Reserve maintained a measured, data-driven approach, reinforcing expectations for a gradual and deliberate policy path.
- Corporate earnings remained resilient, even as growth rates normalized from post-pandemic highs.
- Labor market dynamics continued to evolve, prompting discussion around productivity gains, workforce shifts, and the growing influence of technology and automation.
December served as a reminder that markets don’t move in straight lines, but they do respond to clarity over time. While questions remain as we enter the new year, 2025 ultimately underscored the importance of staying invested, staying disciplined, and staying focused on the bigger picture.
Portfolio Positioning: Staying Disciplined into Year-End
In December, we did not make any allocation changes. That decision was intentional and driven by the same indicators that guide our process each month.
As we closed the year, our models continued to support a posture that could best be described as leaning defensively. While markets remained constructive, our indicators did not signal a need to increase risk or reverse the defensive shifts we made earlier in the quarter. In environments like this, discipline often means holding steady rather than reacting to short-term momentum.
The adjustments made previously, including reducing exposure to small cap stocks and adding more defensive equity exposure, remain aligned with current conditions. Our core holdings also remain intact.
Core Allocations
- Diversified large-cap U.S. equities
- Fixed income aligned with your risk profile
Defensive Changes
- Sold our position in small cap stocks
- Added exposure to Consumer Staples a low volitility index
Areas of Emphasis
Continued focus in Healthcare and Biotech.
As always, our focus is not on predicting market outcomes, but on responding to what the data is telling us. When indicators call for change, we act. When they don’t, we remain patient. December was a month that reinforced the value of that approach.
A Market Signal Worth Understanding
One of the indicators often referenced in these conversations is known as the Buffett Indicator. In simple terms, it compares the total value of the U.S. stock market to the size of the U.S. economy (measured by GDP).
Think of it like this:
If the stock market were a business, GDP would represent its underlying revenue. When market values grow far beyond the size of the economy supporting them, it raises a reasonable question about sustainability.
Today, this indicator sits at a level we’ve only seen twice before in history, placing it roughly two standard deviations above long-term averages. That’s statistical language, but the takeaway is straightforward: by this measure, markets are priced far above historical norms.
What This Does (and Doesn’t) Mean
It’s important to be clear about what indicators like this can and cannot tell us.
- They do not predict when a market correction will happen.
- They do not signal an immediate need for panic or reaction.
What they do provide is context.
Markets can remain elevated for extended periods, especially during times of innovation, productivity gains, or structural economic shifts. At the same time, history reminds us that periods of extreme valuation are often followed by increased volatility or recalibration.
Which brings us back to the original question:
Are we witnessing a fundamentally changing world… or are markets simply stretched?
The honest answer may be: a bit of both.
Why Process Matters Most in Moments Like This
Periods of heightened valuation, shifting headlines, and big market questions can naturally stir emotion. That’s human. But investing success has rarely come from reacting to how the moment feels.
This is where having a plan matters!
Our approach is built around process, not prediction. We don’t attempt to guess what the market will do next, and we don’t make decisions based on headlines, fear, or excitement. Instead, we rely on a disciplined framework guided by objective indicators and long-term evidence.
That process helps remove emotion from decision-making, especially when markets feel uncertain or stretched. It allows us to respond thoughtfully when conditions change, rather than react impulsively when they do.
Staying Grounded Through Changing Conditions
Markets evolve. Economies change. Narratives shift.
What doesn’t change is the value of staying anchored to a well-defined strategy. By consistently following our indicators and respecting risk management, we aim to participate in opportunity while remaining mindful of downside, even when the environment feels complex or unfamiliar.
This discipline is not about avoiding uncertainty altogether. It’s about navigating it with intention.
Looking Ahead
As always, our focus remains on helping you stay aligned with your long-term goals, not short-term noise. We’ll continue to monitor conditions, evaluate what the data is telling us, and make adjustments when warranted, calmly and deliberately.
Thank you for your continued trust. If you have questions or would like to talk through how any of this fits into your personal plan, we’re always here.
Important Disclosures
This communication is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Strategic Advisory Partners (“SAP”) is a registered investment advisor. Registration does not imply a certain level of skill or training.
Past performance is not indicative of future results. No investment strategy, including trend following, can guarantee profits or protect against losses. Market indices mentioned are unmanaged and cannot be invested in directly. Index performance does not reflect transaction costs, fees, or expenses.
Forward-looking statements, including projections of market performance, earnings growth, Federal Reserve actions, and economic conditions, are based on various assumptions and beliefs that may not prove to be accurate. These statements should not be relied upon for making investment decisions.
Investment decisions should be based on an individual’s own goals, time horizon, and risk tolerance. Diversification and asset allocation do not ensure a profit or protect against loss.
This material has been prepared from sources believed to be reliable but is not guaranteed as to accuracy or completeness. This information may change at any time based on market or other conditions.
©2025 Strategic Advisory Partners. All rights reserved.
