Risk management is my number one priority. As I see it, you can't get where you want to be as an investor if you don't control the risk you take.
That ranges from the use of cash, incorporation of hedging techniques, and a whole lot more. Here, I want to draw your attention to one of the less research intensive aspects of risk management.
More News from Barchart
Here's Another Little-Known Firm Jensen Huang's Nvidia Is Quietly Backing
1 Year Into the Microsoft Deal, IREN Is Delivering and a Rally May Follow Soon
Every financial prospectus carries the mandatory regulatory disclaimer: "Past performance is no guarantee of future results." It is written to shield funds against overeager retail investors who buy assets at the top of a cycle.
But here in 2026 and beyond, I think the inverse statement is far more accurate. Relying on the past decade's performance playbook is practically a mathematical guarantee of bad outcomes.
Investors who extrapolate the extraordinary equity returns of the post-2008 era into the next decade are missing the forest for some nice-looking trees. And those trees are part of an imaginary forest.
The Math of Valuation Extremes
The S&P 500 Index ($SPX) delivered roughly 15% annualized returns over the past decade. However, that performance was fueled by a unique, non-repeatable confluence of historic tailwinds including zero-interest-rate policy (ZIRP), endless quantitative easing, cheap energy, and aggressive corporate debt issuance used for share buybacks.
Gravity is not the exact definition of what prompts my concerns for "extrapolators," but it is in the neighborhood. The better-fitting Wall Street expression is "trees don't grow to the sky." The stock market is priced for perfection.
That might not matter in the next month, quarter, or even year. But as I write here all the time, just because the market doesn't fall apart today, it doesn't mean it isn't VERY risky. My entire Return Opportunity And Risk (ROAR) Score is based on that.
And so, I took notice when all three major U.S. stock market indexes' ROAR Scores dropped to 40 within a three-day span this month. This suggests the risk of major loss is picking up steam.
However, this is not simply about saying "stock valuations are rich, don't expect them to make you richer forever."
Story Continues