04 Mar 3rd March 2026

Markets Year to Date

Lots to talk about in the last couple of weeks.

Let’s start with Iran and how the markets will react. Missiles were fired on the weekend so I was very curious to see how futures would open trading on Monday. The level gives us a very good indication of how serious a threat to returns this is

Futures opened down just 0.5%. That is a normal day and happens all the time. So, futures markets said…..yeah, who cares?

They did build as Europe came in and were down 1.3% at one point. Still not a significant level. Then the US stock market opened and everyone went out to buy stocks. It ended the day UP.

So markets are not concerned at all. Would you believe the Israel stock market actually INCREASED on Monday by 6% to reach an all time high? Another indication markets are not concerned. And neither should we be.

Everything is playing out exactly as you would expect. Initial fear based selling, energy rises, gold rises, volatility rises. But all of these are short-term and will reverse in the near future. If you don’t own these sectors, then do not buy them now. You have missed the boat. If you do, think about taking some profits as this is highly unlikely to develop into a long-term issue.

But what if it does? We don’t have much to compare this against. Except the 1990-1991 Gulf War. It wasn’t the same but maybe we can take something from it.

When I looked at how prices moved during that time the biggest thing that struck me was the low for stocks was on exactly the same day as the peak in oil prices. Oil has not increased that much so far, but this is one to keep an eye on. If Oil starts retreating then we can take that as the time to buy into stocks.

During that conflict the S&P fell 17% and the Nasdaq fell 26%. But the recoveries were very different, the Nasdaq went on to increase 57% verses the S&P +26%.

So there you have it. Watch Oil and when it turns start buying the Nasdaq.

I have no idea how, if or when the conflict will resolve. But rather than waste time trying to be a military and political expert, I am just going to watch the markets and trust they know a lot more than me. So far everything has been very subdued. The VIX hasn’t even got to levels we saw in October and November of last year. So despite all this news, markets still think the risk of today is less than it was in October 2025.

Until I see a VIX spike I am therefore not concerned either.

Rotation

The theme of 2026 has been one of rotation. Year-to-date reads like a classic late cycle market. Cyclicals are working, as are commodities, and investors are hedging their bets with less economically sensitive sectors like Staples and Utilities. Meanwhile high PE and growth sectors are falling.

But I just don’t believe we are at the end of the cycle. I think this is just a mid-cycle wobble, caused by concerns over Big Tech capex spending on AI.

I see this as a good opportunity to buy Tech ahead of the inevitable reversal.

Decision makers listen to markets. If the Fed does something that really upsets markets and they respond badly, the Fed reverses course. Same can be said of Trump. We can expect corporations do the same.

Big Tech is spending a lot building out AI and there are questions if they will recover their investments. But they are funding this from their own profits so it’s not adversely affecting their balance sheets. If it continues to become an issue for investors, you can expect Tech to scale back spending plans. And then everyone will breathe a sigh of relief and rush out to buy these massively successful and profitable companies again.

Don’t wait for it. Buy them before it happens.

I must admit to not being able to keep up with the rate of change in AI. Everyday sees a new announcement of another capability. Each new capability sees something else being hit. First it was Software companies as we spoke last week. Then it was the cybersecurity companies like Crowdstrike (CRWD) and Palo Alto (PANW).

It looks like AI is going to be a threat to everything.

So I was confused when Block announced they were laying off roughly 40% of it’s workforce (some 4000 people) to be replaced by AI………and the share price jumped!

The rule seems to be, AI replacing people = good. AI replacing software = bad.

Cyclical Companies

Not all stocks are the same. Broadly, they fall into three categories and it based on the consistency of future earnings. The first category are those that don’t grow. We always avoid them so let’s ignore.

The other two are cyclical and non-cyclical. You trade these differently

Cyclical companies are often commodity producers. Take BHP. It has a fairly stable cost basis but profits depend on the price it can sell iron ore and copper at. If the price of these commodities is low, profits are low and vice-versa. The price of iron ore is outside the control of BHP.

As you can imagine, the BHP share price is closely linked to commodity prices. Commodity prices move in cycles. (hence cyclical).

The cycle normally starts with commodity at a low price and then demand increases. This increases the price of the commodity. Which in turn attracts more companies to go looking for the commodity. Which increases supply and demand and supply even out and prices fall again.

This happens over and over.

The way to play cyclical companies is to buy them when the commodity price is low and no-one else wants them. Then be patient, wait for the supply-demand cycle to play out and sell when everyone else wants to buy them.

Gold here is a great example. Gold had an exceptional, record-breaking year, increasing 64% in 2025. How many retail punters out there were buying gold at the start of the year verses the end of the year? But when was the best time to buy it?

After such a year, now is the time to start taking profits, not getting into this cyclical commodity. Because cycles come and go. They do not remain. You counter trend trade these guys. Buy when prices are low and sell when high.

Tech companies are different. Their profits tend to come from long-term large contracts. They do not depend on the demand-supply cycle of a commodity so you can treat them different. You can hold these much longer-term for their consistency. You want to trade momentum in these guys, follow the trend, don’t buck it like you would a cyclical company.

So the next time you look at a company, decide if it is cyclical or non-cyclical and take appropriate action.

IPOs

No doubt I will ruffle a few feathers here. But there is no way I will be jumping on the big IPOs planned for this year.

I will explain.

It is widely expected than SpaceX and ChatGPT will list this year and retail punters will get their chance to buy in. There is already a lot of hype around this. I am seeing adverts where you can buy reports to tell you how to get in early.

Don’t waste your money. You can’t. I did see a listed ETF a while ago that held some Starlink but for the life of me cannot remember it now. The problem is, their Starlink holding is just a fraction of their overall holdings, so buying this is a long way from being involved in the Starlink IPO.

Not that I want to be anyway. In fact, I would be more interested in shorting that IPO.

Let me explain about an IPO so you can see why I say this.

Companies do not want to list on a public exchange. It is a nightmare for them. The increased scrutiny and reporting is a headache everyday.

But public exchanges are a major source of equity funding. Or rather, used to be,.

These days, the US has an extremely well developed venture capital market. We call it private equity. New companies can go to private investors or VC and raise the funds they need. Then the company has money to invest without the headaches.

Because it is private, it is hard to know exactly how much SpaceX has raised so far. AI tells me it is 11.9billion. SpaceX has no trouble raising money without an IPO.

So why is it going to IPO? And estimates are that IPO will be a valuation of 1.5trillion.

The reason SpaceX will IPO is so the VC guys can sell out of their investment. VC has no other way of realising their profits.

But if they build up a lot of hype and then offer it to retail punters at an inflated price (we are talking 10,000% inflated at the 1.5trillion estimate) then they can sell out and at a HUGE profit.

If you want to buy into this IPO all you are doing is facilitating the VC boys taking a 10,000% return on investment.

But hey, if you think that is good value, I hope it goes well for you.

PS – this VC market in America is why America has such a massive Tech sector. It is the VC guys that fund the startups. We only get to see the ones that survive. Many don’t make it past the VC stage. No other country has the size of VC available which is why no other country has a Tech sector to speak of. Even China is a long way behind.

Warning

Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.