Market Update 2/6/26

Separating Market Movement from Market Risk

Volatility has returned, and both individual stocks and various markets are experiencing meaningful price movements. Bitcoin, which we don’t own or recommend, has been cut roughly in half over the last six months, and silver dropped 33% last Friday. That heightened uncertainty has also influenced equities, with some large-cap names seeing intraday moves of up to 15% in both directions. Periods like this naturally lead us to increase our analysis and carefully double-check the underlying facts. One advantage of equities, unlike commodities, is that they can also be evaluated through their credit default swaps (CDS).

CDSs measure a company’s perceived likelihood of defaulting on its obligations and trade relative to Treasuries. When the spread on a company’s CDS widens significantly versus Treasuries, it can signal growing concern about the company’s financial stability. During especially volatile markets, we closely monitor the CDS market as an additional risk indicator. Currently, the companies where we have exposure are not experiencing meaningful spread blowouts, suggesting that their underlying financial strength remains intact despite market price fluctuations.

Fear and greed can push stocks, commodities, and broader markets to short-term extremes, which is why having multiple analytical tools is so valuable. One challenge with investing directly in commodities or broad market themes is the lack of comparable credit-based indicators like CDS to help assess underlying stability — one of the reasons we generally avoid them as core investments. Our approach remains focused on evaluating all available data and maintaining discipline, rather than reacting solely to the most visible headlines.