February 6, 2026: A Volatile Market and Why You Should Diversify (if you haven’t already)
Back in his day, J.P. Morgan was asked repeatedly what the market would do next. His unsatisfying yet true answer was always, “It will fluctuate.”
As of writing this newsletter, the return on the S&P 500 index (often the go-to index when people refer to the “market”) is negative for 2026 and it has been volatile on the way down. I have heard of many investors whose focus is solely on the S&P 500 index and believe it is all they need because of its exceptional returns lately.
Investors may be so focused on return that they are ignoring the risk they’re taking to get it. Return and risk must always be considered together.
Other stock indices have had positive returns this year. I don’t point this out to say that I predicted it. I point it out because no one could have predicted it because markets are unpredictable. Diversifying away from the S&P 500 is reducing risk in portfolio. This is not an “either-or” scenario, but a “both-and.” The S&P 500 index has its place right alongside a diverse portfolio of other assets. By adding assets that are not 1:1 correlated with the S&P 500 index, you reduce the overall risk of your portfolio.
I’ll mention my attendance at the Land Investment Expo one more time. I attended the closing keynote which was about American exceptionalism and what it means in the short-term and long-term. I’d be happy to tell you more about the speech if you’re interested so just ask (I have a recording I refer back to). My takeaway was this: no one knows with any amount of certainty what the future will hold and diversification is about the only thing we can do as investors to hedge against it. Maybe it means adding international equities, bonds, small-cap stocks, real estate, commodities, etc. Holding a concentrated position for an extended period of time is unwise.
J.P. Morgan’s prediction that the market will fluctuate was true back then just as much as it is today. It will probably be true tomorrow, too.