Peak Fear, Falling Prices

The market is doing what it always does in January:

It finds the scariest headline it can, then prices the entire year through that keyhole.

Fed drama.
Tariff fallout.
Geopolitics.
“Consumer is about to crack.”

Here’s the contrarian take:

Most of the “bad news” people are obsessing over is the same thing that keeps pushing prices down.

And if prices keep coming down without the economy breaking, the biggest risk isn’t that you owned stocks…

It’s that you waited for certainty and missed the move.

This post is a macro orientation piece — not a prediction, not a call to lever up, and definitely not a “buy everything” sermon.

It’s simply the cleanest way I can frame 2026:

soft landing still alive, disinflation still working, and policy risk likely peaks before it fades.

The Fed doesn’t like being wrong, and it really doesn’t like being forced.

If inflation shows even a hint of re-acceleration, they’ll lean hawkish longer than people want. That’s the real risk: cuts delayed, not necessarily hikes tomorrow.

Translation:

But “messy” isn’t the same as “broken.”

A big part of the inflation anxiety isn’t “new inflation.” It’s year-over-year math.

If tariffs reset or ramped after a pause in 2025, the visible CPI “pain” tends to show up later — often into summer comps.

So yes: we can see a pocket of inflation fear this year.

But that also sets up the more important point:

When you hit peak tariff impact, it usually gets easier from there.

The consumer doesn’t slow down because they’re responsible.

They slow down when they lose income.

So I don’t worship retail sales prints. I watch jobs.

If labor meaningfully rolls over, the game changes.

Until then, the “consumer collapse” narrative is mostly projection.

Here’s the part most people miss:

A lot of “fear catalysts” are also price catalysts — and prices drive behavior.

Oil being cheap is bullish for the consumer and margins.

Lower energy isn’t just gas. It’s transport, packaging, chemicals, logistics — everything that bleeds into CPI and corporate costs.

If oil stays heavy:

When shipping lanes normalize and routing improves, you get a slow drip of cost relief.

Not a headline. A grind.

That grind matters more than whatever one politician says on one day.

If China is weak domestically, it competes on price abroad.

That shows up as:

People talk about inflation like it’s a personality trait.

It’s often just global price competition.

A lot of people expected lending to tighten hard.

Instead, private credit appears to be expanding and “safeguards” are getting lighter.

That’s not morally good or bad.

It’s just the truth:

This is how you get bubbles eventually.

But bubbles don’t pop the day liquidity improves.

Whether you call it a “Polish catalyst” (policy catalyst) or just politics doing what politics does:

Election-adjacent years have a pattern.

Politicians don’t campaign on “we tightened conditions.”

They campaign on relief.

If tariff pressure becomes politically toxic, the path of least resistance tends to be:

Markets trade incentives, not speeches.

That’s the lens.

Here’s the core framework I’m using for 2026:

That mix is not “rocket ship.”

It’s grind-up with violent shakeouts.

Which is exactly why most people won’t stay positioned.

One of the most underappreciated shifts this year is that AI is moving from a scarcity trade to a cost trade. The first phase of the cycle rewarded whoever controlled the most expensive compute. That phase is maturing. As chips, inference, and model access get cheaper, the economic leverage flips downstream to the application layer — companies that use AI to underwrite risk, automate workflows, and personalize decisions inside real businesses. This is why falling compute costs are a tailwind, not a headwind, for names like Lemonade, UiPath, and Zeta Global. Cheaper AI expands margins, accelerates deployment, and improves unit economics — yet the market is still valuing many of these companies as if AI costs stay permanently high. That disconnect is where the opportunity forms. When AI becomes an input instead of a headline, value accrues downstream — quietly at first, then all at once.

That’s a rookie mistake.

Markets move on direction and expectations, not on the exact meeting where Powell finally nods.

When everyone rushes into the same safety blanket (gold, silver, etc.), you’re no longer buying safety — you’re buying a consensus trade.

Consensus trades don’t protect you.
They just move faster when they unwind.

Cheaper chips can be bad for chip margins.

But it’s rocket fuel for the application layer.

If compute gets cheaper, the “real economy” AI build-out gets broader, not smaller.

That’s disinflationary and productive.

This is the part that matters.

Because if we get the soft landing:
today’s valuations won’t look expensive in hindsight.

Not because everything is cheap.

Because expectations are still anchored in fear.

That’s it.

Everything else is noise.

The market is addicted to drama.

But the economy moves on costs.

And right now, the cost picture is quietly improving:

So yes, we’ll get scary headlines.

We always do.

But if you’re waiting for a year with no fear to put money to work, you’re going to spend your life watching.

And the market doesn’t reward spectators.

It rewards people who can stay rational while everyone else refreshes the news.

— Connor
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