A (slightly) More Cautious Stance

February 2, 2026

"He who moves a mountain begins by carrying away small stones." — Confucius

A (slightly) More Cautious Stance

You may have noticed a significant increase in trading confirmations at the start of February. We haven’t made any major changes since purchasing assets last spring during the market declines on Trump tariff announcements.

We decided to reduce our long equity exposure across almost all portfolios at the start of February. It is reminiscent of the same reduction we made at the start of 2025.

My long-term view has not changed, but slow and steady wins the race

Shifting geopolitics continues to support marginal improvements toward peace which should allow for global growth and opportunities in many countries led by the USA. My views and probable positive outcomes that support western liberal democratic values remain unchanged.

Despite positive developments in Latin America, the Middle East, and in Europe, I can also see several impulses pushing up near term volatility.

Some of those market changes are the following:

• Kevin Warsh nomination for Fed Chief. My view, I believe him to be an excellent choice for the Federal Reserve (Fed), but changes can also bring uncertainty:

  • Reducing the Fed Balance sheet. This policy is arguably one of the largest contributors to the Rich/Poor divide in terms of wealth in the USA (and globally). So, it is a worthy goal, but it can also produce market disruptions (and is likely why Jerome Powell stopped the reduction process).

  • His assumed belief that AI is boosting productivity and is leading to disinflation. All else equal this should mean the Fed will lower interest rates.

  • Less telegraphing of monetary policy. Again, a worthy goal to move away from an era of providing more certainty to speculators and gamblers in financial markets. Injecting uncertainty and ensuring gamblers know that there are no certain bets is a good idea. Kevin Warsh seems more inclined to ensure speculators assume more risk and may be less inclined to rescue speculators when it causes market losses.

• Speculation in gold, silver, crypto, datacenters, and other parts of the market appears to be significant. Young people (mainly men) appear to be gambling on sports, short term equity movements, and all manner of things which they know little about. Why is this an issue:

  • There is significant amount of money flowing into various parts of the financial markets, and it can push prices around in the near term. Gamblers go to where the “action” is. Ultimately, the majority will lose money, but they will impact prices in the near term. I utilize extreme price movements in the short term to enter and exit assets that can help grow wealth in the longer term. As an example, I mentioned previously, we sold gold and silver (to these gamblers) after having held a position for many years. The price can still go up of course, but this extreme volatility (up and down) does not serve our goals in growing wealth through quality risk-adjusted returns.

  • Extreme gains and losses in one area of the market can often impact other areas of the market. Uncertainty can sometimes breed uncertainty. Where there is increased uncertainty, there is increased risk, and when risk increases, our portfolio positions should be reduced.

• Last April and May (after the tariff announcements), we utilized market declines to increase our exposure to US and global equities. We remained well invested for all of 2025 and through January 2026. During that t ime, we received many inquiries along the way from those that did not share our enthusiasm for investment. Now that the crowds appear to be more comfortable being invested, we have become slightly less enthusiastic. We tend to lean against consensus views (it’s the only way to potentially outperform after all), and our risk reduction over the past couple of days expresses this acknowledgement that the crowds are more comfortable with taking risk. Essentially, we have taken (some) profit on many of the companies and equity indices (foreign and domestic) that we purchased back in the spring of 2025.

• There is a lot going on geopolitically and technologically. In the medium to long term, I am very positive on economic growth/opportunity, prosperity for many, and stronger governments aligned with western liberal values, but in the short term, many government leaders really despise Trump’s way of doing business. In the short term, this can cause disruption as emotion of politicians and fund managers cause them to act:

  • Attempt to reduce their exposure to the US financial markets. I see this as almost an impossible task, and I think it is also a mistake because this is where global leadership remains both in terms of economic and military power. Basically, it’s likely a poor financial decision. But again, in the short term, it can cause some market tumult. See the first chart below showing foreign holdings of U.S. Treasury Securities; there is no alternative to the U.S. Financial system (maybe one day, but it’s a story for the distant future). The bottom chart shows foreign holdings of ALL U.S. Securities.

If foreigners are concerned about U.S. Treasury debt, why are they not reducing holdings?

Figure 1Taken from The Daily Shot January 23, 2026, https://thedailyshot.com/2026/02/02/gold-and-silver-suffered historic-plunges/?utm_source=chatgpt.com

Foreigners may not like the way the USA administration is acting, but the reality is that we all have a vested interest in the United States. The USA is becoming more dominant in the global economy. Change is always hard, but the USA and its allies will continue to work together (including NATO).

Figure 2 Taken from Treasury International Capital (TIC) Annual Survey April 30, 2025 https://home.treasury.gov/data/treasury international-capital-tic-system

• Artificial intelligence is amazing, and as I have suggested previously, I suspect it will cause huge disruption and change. Currently, this narrative is taking over, and the market is reacting by selling any company they believe will be disrupted. Once again, it is probably a mistake to dump all companies that fit with this narrative. The valuations for many companies that have outstanding businesses, brands, and are producing lots of cash flow are becoming very compelling to us. We will be looking to buy many of these companies as the market stabilizes, but we can be patient (I think).

I will end things there this month. Keeping my thoughts short and sweet (for once).

In summary:

• We have reduced risk by taking profit on many positions we added in the spring of 2025. We have also sold positions that have not worked out as we anticipated.

• We have dry powder to go shopping for the many opportunities we believe are presenting themselves.

• Our overall view is very optimistic on the opportunities in the United States, Europe, and Latin America in particular.

• China and Russian influence continue to wane. We hope the situation in Iran will solve with minimal disruption, and that the citizens in Iran will gain some freedoms and prosperity. I cannot see a way forward for the current regime without significant change internally.

Lastly, if you want to understand more about the United States. Have a look at how we were established by watching Ken Burn’s documentary on PBS: The Revolutionary War. It is very well done, and his perspectives helped me further understand the nature of our country today.

Best,

Joe

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i Investment advice offered through August Wealth Advisors, LLC, a registered investment advisor.

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