Summary

• There’s no question that the profit margin expansion of recent years partly accounts for the extremes we see in revenue-based valuation measures.
• Despite the market advance in recent weeks, our investment discipline, even as it stands today, has classified the market outlook as constructive in only a single week of February and a single week of March during 2026.
• It may be helpful for investors to consider the role of alternative investments in a portfolio.

We know that conditions that join extreme valuations with unfavorable internals – particularly with lopsided bullish sentiment – have generally been followed by very poor market returns, on average. I’ve often referred to these as ‘trap door’ conditions. But looking at our 2024