February 2026

Written By Jason Slowbe

IN THIS ISSUE

  1. Trading Trump

  2. Year of the Stock Picker

ONE MORE THING...

  • Amateur hour, without the amateur

  • Haystack or Needle?

  • Feeling Dumb?

Trading Trump

I have discussed the challenge of event-driven strategies profiting from political events.  Short-term political winds are orthogonal to reliable long-term investment strategies.  Of course political leaders do influence markets, and Presidents do have an outsized influence relative to other individuals - but that outsized influence is still less than you think (Freakonomics).  

In December 2024, after the Presidential election but before Inauguration, I also noted that “Donald Trump is quite clearly a non-representative Republican relative to prior Republican Presidents”.  Simply, speculation about what Trump’s second presidency means for market returns lacks predictive value.

As we enter 2026, one year into Trump’s Presidency, the market is now providing a masterclass in why investing based on what we think President Trump will do next is an unwise strategy.  A not-small number of investors have found themselves caught on the wrong side of the “TACO” trade, a term coined by the Financial Times meaning “Trump Always Chickens Out”, to capture the pattern of Trump making a dramatic policy threat, markets reacting, then the President backing off the threat.

Many of Trump’s actions in this past year have contradicted not only conventional Republican Party platforms but even the President’s own prior positions.  Consider:

Given Trump’s history of making bombastic threats - purportedly for bargaining power - it’s difficult for investors and businesses to deploy cash when positions are so transient.  As we learned this month, the Supreme Court struck down Trump’s tariffs, introducing further uncertainty into future business decisions.  And as we head into this year’s midterm election cycle, investors and businesses may not be keen on putting capital behind Trump’s proposals given the potential them to be reversed - this year by Republicans potentially distancing themselves from Trump’s not-so-conservative proposals, by Democrats next year potentially taking control of one or both chambers of Congress and turning Trump into a lame duck, and by Republicans potentially losing the White House two years after that.

So how can investment managers navigate Trump’s style of leadership and policy-making?  Remember that investing is a no-called-strikes game.  We do not need to take a position on every issue before us.  We can wait for only the most fruitful, reliable, even durable opportunities for long term investment performance and only then, swing.  

Year of the Stock Picker

Plenty of active managers are once again declaring 2026 to (finally) be the "year of the stock picker.”  Perhaps it is stocks’ high valuations, high implied dispersion, economic headwinds, whatever, that create a fertile ground for active managers to exploit market mispricings.  

Although some active managers are encouraged by a potentially lower correlation backdrop, history reminds us that similar optimistic proclamations were made in almost every year prior, and yet broad underperformance by active funds consistently remained the norm.  2025 was again a brutal year for stock picking as only 21.22% beat the S&P 500 Index.  And as the Law of Large Numbers plays out over a 15 year time horizon, that rate decreases to only 10.07% of actively managed large-cap funds beating the S&P 500 Index.  (S&P Global's SPIVA Report through Dec 31, 2025) 

This persistent reality validates the late Jack Bogle’s philosophy that "the stock market is a giant distraction from the business of investing”.  Instead of wasting capital searching for that "needle in a haystack” that rarely appears, investors are statistically better served by simply "buying the haystack" through low-cost index funds.  

So as you navigate the stock-picking headlines of the new year, remember to judge an investment strategy by the quality of the process rather than the chance at an upset.

May the Likelyhoods be ever in your favor.


ONE MORE THING…

The information and opinions contained in this newsletter are for background and informational/educational purposes only.  The information herein is not personalized investment advice nor an investment recommendation on the part of Likely Capital Management, LLC (“Likely Capital”).  No portion of the commentary included herein is to be construed as an offer or a solicitation to effect any transaction in securities.  No representation, warranty, or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained herein, and no liability is accepted as to the accuracy or completeness of any such information or opinions.  

Past performance is not indicative of future performance.  There can be no assurance that any investment described herein will replicate its past performance or achieve its current objectives.

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Jason Slowbe
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JANUARY 2026