Being Cautious is Getting Expensive

Volume 164 - The Week Ahead

January always tempts people into believing the new year will give them a reset and a new market. Unfortunately, it rarely works like that. Markets don’t care about calendars, as you can see, since the first sessions of 2026 have behaved as if December never really finished.

Instead of weakness into the new year or a moment of balance, we’ve seen the same parts of the market that were de-grossed, hedged, or rotated out of into year-end become early leaders. The S&P has added ~150 handles since the last Week Ahead titled “Why Last Week’s Dip Was a Bear Trap”, but the manner of the move has been more interesting than the magnitude. No euphoric chase, no capitulation from sceptics and no attempt by the market to make anyone feel comfortable. If anything, discomfort has increased. And that discomfort is expensive.

The mistake coming into January wasn’t being cautious, it was assuming the new year would give you a clean entry. Spoiler alert - it hasn’t. Early performance has forced portfolio decisions into the worst possible timing window: right before earnings, when paying up feels stupid and waiting feels prudent. That’s exactly how inflection points leave people behind.

I’m already +8.4% YTD, most of that from core positions that refused to give people a second chance at better levels. The names that got rotated out into year-end have been the early leaders, as I said. While the “wait for a pullback” crowd have been left behind for now… I’ve barely started to get active.

The only real adjustment I made last week was taking CRDO up to a 5% weight mid-week around ~130 after confirming the Amazon cabling rumour was nothing more than a colour change (purple to orange/blue) rather than a shift in supplier. The stock reclaimed the selloff and closed the week at 150.

But here’s the issue as we approach earnings season - owning the right stocks is only half the battle during earnings season. That’s where most portfolios leave alpha on the table as they’re positioned for direction but not for the event itself. Earnings season should be about monetisation rather than constantly coin flipping.

This brings me to a new strategy that I’m testing this earnings season, which for now I am calling Delta Surfing. (Feel free in the comments to share a name for it). Periods like the end of last year and the beginning of this one reward expression rather than direction. So if you’re not monetising the event, you’re kind of missing the point of the event. The strategy is a way of capturing earnings volatility without the binary risk of directional calls, it eliminates getting punished for being right at the wrong time and means you will not need to make any heroic calls. It’s still early days, and I’m treating it as an experiment for now, but the initial signals have been encouraging.

Paid subscribers will be getting every Delta Surfing trade as I enter it, plus, as normal, the ongoing management of core positions that are already working.

Below, I’ll go through how Delta Surfing works and why the coming weeks will separate the performance for those who adapted early from those still waiting for the perfect moment.