The Implausibility of Market Certainty

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The market, as it insists on being called (a rather presumptuous title, when you consider the sheer improbability of its existence), recently completed another annual orbit around the sun. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite – those delightfully arbitrary collections of companies – all managed to inch upwards, gaining 13%, 16%, and 20% respectively. Not bad, for something built on hopes, fears, and the collective delusion that someone, somewhere, knows what they’re doing. (It’s a bit like believing you can predict the trajectory of a particularly erratic dust bunny.)

Much of the optimism stems from the current fascination with Artificial Intelligence, a technology promising either utopian bliss or existential dread – depending on which algorithm you ask. The sheer amount of money being poured into AI data centers is, frankly, astonishing. Investors seem to believe it will become a ‘multitrillion-dollar market.’ (Which, when you think about it, is just a very large number followed by a lot of zeroes. A concept humans seem strangely drawn to.)

And then there’s the Federal Reserve, that enigmatic body responsible for tinkering with interest rates. The prospect of further cuts is, naturally, encouraging. Lower rates make borrowing cheaper, which theoretically spurs growth. (Though it also encourages more borrowing, which is a bit like trying to extinguish a fire with gasoline. A complex issue, really.)

The previous administration’s tax policies also played a role. A reduction in the corporate tax rate (from 35% to 21%) meant companies had more money to… well, do things with. Share buybacks, mostly. (A perfectly rational activity, when you consider that making a company look more profitable on paper is often more important than actually being more profitable.)

However, beneath the veneer of optimism, something curious is happening. Investors, despite their cheerful pronouncements, are behaving… cautiously.

The $7.8 Trillion Warning Signal

The Dow, S&P, and Nasdaq have been hitting record highs, yes. But so has the amount of money parked in money market funds. A staggering $7.8 trillion, to be precise. (Which is roughly the GDP of several small planets, if such a thing were easily quantifiable.)

Money market funds are, essentially, a safe place to stash cash. They invest in short-term, low-risk assets. When investors flock to them, it suggests they’re less interested in the potentially rewarding, but also potentially catastrophic, world of stocks. (It’s a bit like deciding to spend your vacation in a bunker, just in case.)

The recent aggressive rate hikes by the Federal Reserve incentivized this move. Higher rates meant higher yields on those safe assets. But even as rates have fallen, the inflow into money market funds has accelerated. This is… unusual. It suggests investors aren’t just seeking yield; they’re seeking shelter.

And there are reasons to be concerned. The market is, to put it mildly, expensive. The Shiller P/E ratio – a measure of market valuation adjusted for inflation – is near its highest level in history. (Only surpassed, apparently, during the dot-com bubble, a period remembered fondly by no one except those who sold at the top.) History suggests that such valuations are rarely sustainable. (The market, it seems, doesn’t appreciate being overvalued. A rather ungrateful attitude, when you consider all the effort everyone puts into inflating it.)

$7.8 Trillion is now sitting in Money Market Funds, a new all-time high 🚨🚨

— Barchart (@Barchart) January 15, 2026

And then there’s the issue of ‘next big things.’ Every technological revolution seems to be accompanied by a bubble. AI and quantum computing are no exception. (The laws of physics, it seems, are no match for the laws of speculative finance.)

And let’s not forget tariffs. Unpredictable trade policies add another layer of uncertainty. (A bit like playing a game of chess with a particularly capricious opponent.)

The message is clear: investors are piling into safe assets, despite their optimistic pronouncements. Actions, as they say, speak louder than words. (Especially when those words involve phrases like ‘sustainable growth’ and ‘long-term value.’)

The Inevitable Pendulum Swing

Historically, markets have a peculiar habit of oscillating between exuberance and despair. Bear markets are unpleasant, but they tend to be short-lived. Bull markets, on the other hand, can last for years. (The universe, it seems, enjoys a good contradiction.)

Data from Bespoke Investment Group shows that bear markets rarely last longer than a year, while bull markets often stretch on for several years. (Though, of course, past performance is no guarantee of future results. A disclaimer that seems increasingly pointless.)

Crestmont Research has found that even over rolling 20-year periods, the stock market has consistently delivered positive returns. (Which is reassuring, if you happen to be planning a very long-term investment strategy.)

The near-term outlook may be uncertain, but the long-term potential of equities remains undeniable. As a dividend hunter, I find comfort in the fact that even during turbulent times, some companies continue to generate consistent cash flow and reward their shareholders. (A small victory in a universe of infinite chaos.)

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2026-01-24 12:13