Back in the day when I actually read books, there was a classic about dying/death titled “Tuesdays with Morrie.” I read a few chapters until it began to seem like my life was closer to Monday evening than a relaxed weekend. In the ensuing years I had many lunches with Boomer friends in their early 70’s that always involved complaints about knees, hips, backs, or worse. One of us was 10 years or so older than the group, who sat back, waiting his turn, as if to mimic the Grim Reaper and warn what lies ahead for the rest of us over our next decade. “Just you wait,” he would chuckle. “Just you wait.”
Well in years since I have fearfully waited — especially between 10 pm and 5 am for signs of the “Reaper’s” warning but nothing yet — only an eight-year bout of neuropathy which causes my feet and lower legs to go partially numb. I now would fail an alcohol-free DUI test when asked to walk a straight line on any highway or hallway for that matter.
Anyway, after numerous MRIs that produced the same conclusion, all of my doctors were consistent with one diagnosis — “There’s nothing I can do,” they said. The last one though had the brilliance to suggest as I staggered out the door — “Why don’t you get a cane?”
Too funny I thought, but then, while not a “four-legged” walker, an upside-down golf club is likely in my future as a cane substitute. But symbolically, the introduction of a cane into my life suggested significant change. My new cane represents a mutiny of sorts compared to a prior lifestyle of younger, more independent locomotion. “Just you wait” appears to be more and more visible on my life’s horizon as I walk forward in halting steps.
Recently, stock market numbness closes the trading day. No wholesale crash, just a little wobbling for now with positive numbers for half of January. But I have a sense it’s in need of a cane to steady its momentum.
Positives abound with fiscal and monetary stimulus leading to earnings expectations that steady prices for now. But I wonder how U.S. markets in particular can thrive in a current environment of political unrest that threaten an historical capitalistic model based on competition and survival of the fittest. Even in AI space, tariffs and government aid lead possibly to “unfittest” for some in a distant marketplace.
Yet almost as important, the question of “valuation” has joined other negatives.
One of Warren Buffett’s favorite market indicators is shown in this Outlook. It compares the S&P 500 price vs. U.S. nominal GDP (real growth plus inflation). It’s at a historic high. Logically, stock market earnings are positively correlated to GDP growth and to be fair, other influences such as productivity, tax rates and geopolitical influences can suggest no need for a cane. Such is the current case. Bulls simply conclude that AI changes everything . No wobbling — just sprinting. But I throw my hat in with the old wizard Warren Buffett. Valuation casts a shadow over markets in 2026. No crash, just a forward weave requiring a cane, unlike 2025.
S&P 500 vs U.S nominal GDP
My favorite stocks: ET (Energy Transfer) yielding 8.5%; and AGNC — a mortgage REIT benefiting from a future dovish Fed yielding 12%. And bonds? The 10 year Treasury moving to 4½ as supply overwhelms demand and the inflationary impact of tariffs is finally recognized.
Copyright © William H. Gross
