Investing and speculation both seek profit through market participation but differ sharply in method and mindset. Investing is long-term, research-driven, and focused on buying quality assets at reasonable prices, expecting value to grow through fundamentals like earnings and cash flow over years. Speculation is short-term, price-driven, and often fueled by momentum, sentiment, news, or leverage, betting on quick price moves rather than intrinsic worth. | | Market Update - February 2026 | |
- Stocks rose slightly during January. Energy, Basic Materials and Industrials did quite well; Financials, Health Care and Technology were weak.
- Bonds were unchanged during the month, with Municipal and High Yield bonds doing well, while Investment Grade bonds performed poorly.
- Silver reached another all-time high, triggering massive interest in the precious metals space, but sold off heavily on the last day of the month as the exchanges raised margin rates.
- Inflation remains muted but the Fed elected to keep interest rates stable at the meeting in late January. Their Fed Funds rate remains at a target range of 3.5% - 3.75%.
| | Table 1: Market performance estimates as of 1/30/2025 (LIMW) | | |
With silver up 20% in January and gold rising 12%, this month's note will discuss precious metals, speculation and investing. Silver was up 70% December 31 through January 29th but fell 30% on the last day of the month, January 30th. Because percentage math is not intuitive, remember that even with the last day losses, silver is up 20% from 2025.
Speculation and investing both involve putting money at risk in pursuit of profit, but they differ fundamentally in approach, time horizon, and reasoning. Investing focuses on the long-term ownership of fundamentally sound assets—such as stocks, real estate, or businesses—based on thorough analysis of intrinsic value, earnings potential, management quality, and economic trends, with the expectation that value will compound over years or decades. Speculation, by contrast, is typically short-term and driven primarily by price momentum, market sentiment, news events, or anticipated price swings rather than underlying value; it often relies on leverage, technical patterns, or "greater fool" dynamics, accepting much higher risk of rapid loss in exchange for the possibility of quick gains. In essence, the investor asks, "Is this asset worth more than its current price over the long run?" while the speculator asks, "Can I sell this to someone else at a higher price soon?"
Commodity markets are dominated by speculative traders. That's why commodity futures markets exist; so speculators can trade the changes in price without the bother of managing the physical commodity. This annoys the commercial merchants in energy, precious metals and grains to no end.
There is a lot of analysis wondering whether the gold and silver price spike is a sign of Weimar-like hyperinflation ready to descend on the developed world. The post pandemic stimulus response certainly DID increase inflation globally and we are still living with the consequences. Inflation rates have since fallen, but prices are certainly not going back to 2019 levels.
Additionally, there are signs that long-term investors are accumulating precious metals for inflation protection or for geo-political reasons. The Tether crypto coin managers have been buying gold heavily, as has the Chinese government.
It is our view that all three of these reasons are driving the remarkable trading behavior of gold and silver:
- Speculation
- Long-term investment
- Geo-political insurance
Markets are not efficient. They are emotional and prone to extreme exaggeration. Additionally, exchanged traded commodities are influenced by leverage (i.e. borrowing) and the exchange rules can change to push prices up and down. That seems to have played a major role in Friday's intense sell-off of gold and silver.
| | Figure 1: Major commodity market performance 2010-2026 (LIWM) | | Figure 1a: Silver and Gold late Dec 2025- Jan 30th 2026 (LIWM) | | |
Let's review a few slides that describe these various forces affecting the gold and silver markets.
Figure 2: China has been a big buyer of gold for years (Financial Times)
| | Figure 3: Central Banks have similarly been big buyers of gold (Financial Times) | | |
Finally, Federal Reserve interest rate policy has historically had a big impact on gold price. When the Fed is stimulating as they did 2008-2010, gold rises. When they are not stimulating as they did 2012-2020, gold falls.
Notice that the real yield (ie nominal 10-year yield MINUS inflation) indicates gold pricing should be weak. Obviously, that is not happening. Why is this? Pandemic stimulus was over the top and we are still living with the inflationary consequences of that. Inflation peaked in 2022, but investors are behaving as if we are still looking at 9% CPI growth.
Figure 4: Gold appreciation compared to Federal Reserve interest rate policy 2000-2025 (Longtermtrends.com)
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Finally, it should be noted that the Fed quietly restarted quantitative easing last month. They are now buying $60 billion/month in Treasury bonds. Remember the pandemic? During that crisis they bought $120 billion/month. So, that means with the markets at all-time highs, they are doing 1/2 the stimulus of the Covid pandemic. It makes you wonder if they know something we don't or if it is just pressure politics.
Please be careful when investing in precious metals. Today's gold and silver narrative sounds ominously similar to last year's Bitcoin chatter.
Figure 5: The Fed restarts quantitative easing (@FinanceLancelot)
| | Not everyone is worried about inflation | | |
Let's start with our monthly reminder that Consumer Confidence is in the pits. The US consumer is segmented into different groups, obviously. The wealthy with their high salaries and investments are feeling quite good. The stock market hit all-time highs last week, so they are spending freely on cars and vacations.
The middle class and lower classes are struggling with the residual effects of inflation and the roll-off of Covid-19 stimulus programs. One of the most painful changes is caused by the planned sunset of Obamacare subsidies that were extended during the pandemic.
In general, the economy will keep chugging along as long as the stock market boom keeps the upper-class spending. If that should crack, spending and the economy should sour quickly.
Historically, weak consumer confidence is deflationary.
Figure 6: Four aspects to lousy Consumer Confidence (Bloomberg)
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The broad labor market is also stagnant. While not recessionary, it is clear that we are past peak labor market expansion. Again, most of the growth in the economy is isolated to the technology sector as data centers for artificial intelligence get built out.
Figure 7 and 8: Slides on the labor market (Clearnomics)
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The bond market reflects the short-term trend of Fed cutting rates and some minor economic weakness.
Figure 9: 2-year and 10-year Treasury Bond interest rates (Clearnomics)
| | Figure 10: Federal Funds rate forecast 2026-2029 (Clearnomics) | | How did the last big tech bull market play out? | | |
Technology spending on artificial intelligence is currently very strong. In many ways, the narrative and spending behavior of technology companies strongly resembles that of the late 1990s technology bubble.
Standard & Poor's recently published some research comparing the performance of different types of companies before and after the 2000 market peak. Momentum Stocks dramatically outperformed High Quality and Value Stocks in the run up to the market peak of 2000. These were companies like Cisco, Microsoft, Lucent, and Intel.
Figure 11: Factors driving stock market performance 1995-2000 (Standard and Poor's)
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After the market top in 2000, this performance dichotomy completely reversed. High Quality and Value sectors began to significantly outperform as the Momentum (i.e. technology) stocks fell. Stocks such as Walmart, Coca-Cola, McDonalds, Proctor & Gamble, and many others took the lead in beating the S&P 500.
Figure 12: Factors driving stock market performance 2000-2007 (Standard and Poor's)
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Using the same factors, we can see that there are many similarities in today's market to that of the late 1990s. This doesn't give us any real timing hints, but it does provide us some guidance on where to invest when the current capex boom in technology begins to slow down.
Figure 13: Factors driving stock market performance 2020-2025 (Standard and Poor's)
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At this point, 2026 looks like it will be a bumpy, but ordinary year. The GDP growth numbers look good, tech spending is currently on track, and the Fed has lowered rates to a point just above the inflation rate. We are watching Europe and data center spending closely for signs to change our current strategy.
In our last graph below, I want to remind our readers that markets tend to revert: asset classes that outperformed tend to underperform in subsequent years. Note the great performance of stocks over bonds 2023-2025 and the poor performance of bonds and commodities. We are watching for signs that this relationship will flip over in 2026.
As always, we welcome your feedback and are happy to discuss our research and how it applies to your situation.
Figure 14: Asset class performance by year 2011-2025 (Clearnomics)
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Rob 281-402-8284
Chris 281-547-7542
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Christopher Lloyd, CFP ®
Vice President and Senior Wealth Planner
Lloyds Intrepid Wealth Management
1330 Lake Robbins Dr., Suite 560
The Woodlands, TX 77380
281-547-7542
Chris.Lloyd@lloydsintrepid.com
www.lloydsintrepid.com
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