Hello reader, welcome to the latest issue of HX Weekly!

Each week we bring you a new edition of HX Weekly that includes three distinct sections.

In the first section, Thoughts on the Market, we'll offer insights into current economic and market news.

In the second section, HX Daily Redux, we'll revisit investing concepts, tactics, and more from past issues of HX Daily.

And in the third section, Market Wizard’s Wisdom, we’ll share thoughts, quotes, and theories from the greatest investing minds of all time.

Now, let's dive in!

Thoughts on the Markets

Is This The End or The Beginning?

Over the last six months or so, the overall stock market indices have done a lot of nothing.

Here is a chart of the market capitalization weighted S&P 500 over the last two years…

We have several observations about this chart.

First, as we mentioned at the start – it has done nothing. Today, it is at the same level that it was in early October.

Second, it has done this consolidation period with very little volatility. While there was a swoon in stocks in November, the index has been trading in a narrow range.

Third, despite the lack of progress, the intermediate-term long-trend remains very positive.

This might be a boring chart, but it is a STRONG one.

Underneath the placid surface of this most important stock index, though, there has been a LOT of movement.

Here is a chart from one of our favorite research services – Bespoke Investment – showing the range of movement in the individual stocks in the S&P 500…

On the chart you can see that while the S&P 500 itself has been in a narrow +/- 5% range, there are only 94 stocks that have been that docile.

On the other end of the volatility spectrum there have been 117 stocks that have gone up or down at least 20%. That is a BIG move in just a couple of months.

One bit of good news is that there are more that have gone up than down.

This is reflected in the fact that the equal-weighted S&P 500 is currently outperforming the market capitalization weighted version by several percent.

This is a mixed bag for many investors.

The frustrating part is that many of the stocks that have suffered have been the heavily owned technology stocks. In fact, anything that has outperformed over the last two years has struggled this year.

What has rallied is everything else.

By the very fact that the stocks that are struggling are heavily owned means many investors are frustrated at this point.

Is all this a bad sign for the future in the stock market?

We don’t think so at all. In fact, we think it is a strong positive.

While we don’t think a “narrow” stock market is always a bad sign, it is neither a good one.

An example of when it was a terrible sign was the Internet Bubble back in 1999 and early 2000.

Here is the chart of the NASDAQ Composite from back then…

Here is the chart of the equal weighted S&P 500 over that same period…

Back then when technology stocks thrust higher, it resulted in everything else selling.

This is not at all what happened here in the last two years.

Again, the equal-weighted S&P 500 has acted well and recently hit new highs.

The bigger concern, though, is the recent underperformance of technology stocks relative to the average S&P 500 stock. Is this the beginning of a collapse like early 2000? Look at the chart above of the NASDAQ and the red line.

We don’t think so at all. Our reasoning?

While technology stocks have had a great run over the last couple of years, it is nothing at all like what we saw in late 1999.

Additionally, the move higher in technology stocks has been backed by robust earnings growth. They have actually gotten cheaper over the last few years as their earnings have expanded.

While there are a lot of cross currents in the stock market right now and it can be frustrating for investors, we advise folks to hold tight.

We believe February 2026 looks a lot more like February 2019 than February 2020 and – if that is the case – there could be some HUGE returns ahead for the stock market.

We know the last few years we have shared our piece about how BASEBALL is like investing…

Well, we think it is a great note and this is a great time of year so we are doing it again.

We hope you enjoy the note and LET’S GO YANKEES!

HX Daily Redux

Let America's Pastime Guide You Through The Markets

Longtime readers know I'm a big sports fan, particularly a huge baseball fan.

I don't know what made me fall in love with baseball. My mother was from South America, and my father never played sports (nor took me to any), but it always appealed to me.

It could be my summers spent at home by myself watching the Chicago Cubs on WGN or the Atlanta Braves on TBS while my mother was working. Maybe it was the fundamentally "American" nature of the sport. (It is called "America's Pastime," after all.)

Or it could be the incredible strategy underlying the sport that would be barely evident to someone who didn't know what was happening in a game.

For whatever reason, I became a huge fan and have attended close to 800 games in six different countries. I plan to add my 7th country to the list by seeing my New York Yankees play in Mexico in about a month!

While I never played baseball past the sixth grade, I became an avid student of the game. I found some of the sport's simple strategies appealing. Not just for the game of baseball but also for the game of life – and investing...

With the baseball season kicking off last week with the reporting of "pitchers and catchers," we thought we would share a note we wrote a few years ago.

Here are three principles of baseball that apply directly to the stock market...

1. Hit the ball where it's pitched.

This is one of the investing sayings I have repeated the most in my career.

I speak often about "selectivity" in making your trades or investments.

To outperform the markets, you need to find the best opportunities available. If you were playing the averages, you could buy an index fund and be done with it.

Of course, it is possible to outperform the markets, and the key is being selective.

Along with selectivity, you have to take what the market is giving you, not what you want it to be giving you.

Last year was a great example. While it was a terrible year for long-term investors, it was a great year for trading.

To a certain extent, the strategy we use in HX Trader is precisely what they talk about in baseball. We only look to take what the markets give us.

There are always good pitches in the market; you just need to figure out when (and how) to swing the bat.

2. Trends persist.

This one comes from Tony La Russa, one of the most excellent baseball managers of all time.

La Russa believed that trends – or hot and cold streaks – constantly emerge in baseball. The best bet is to follow them until they demonstrate they are not working. Sure, they can be painful when they stop working, but streaks can go on for a long time.

You can make a lot of money if you are disciplined in identifying the streaks and following them until they change. I had never given much thought about that as it relates to baseball, but I think about it a lot in investing.

One of my main rules in HX Trader is looking for trends, not only in stocks but also in a company's operational performance.

For our core RSI-based trading strategy, I look for stocks that have been long-term winners but also management teams that are beating Wall Street's expectations and have a history of growing their businesses.

The key in the markets is identifying the trends and figuring out how to capitalize on them appropriately.

3. Focus on the approach, not the outcome.

Or, as I like to say, "Plan the trade, trade the plan."

Outcomes – in baseball and investing – are uncertain. My job is to develop a plan and methodology to help me determine where to find the best opportunities.

But even those can fail. If you have a good plan on how to deal with the outcomes – positive or negative – you will ultimately win out with a winning strategy.

Like in baseball, even if you "fail" half the time in the markets, you can still win!

We have had the great privilege to work with some insightful intellects and one of those is my (Enrique Abeyta) colleague Sean Ring at Paradigm Press.

Sean is based in Northern Italy and shares his keen insights first thing each day in his Daily Reckoning free e-letter. I highly recommend you sign up for his newsletter here. 

Just one warning – he is NOT for the feint hearted! One of the reasons I love his writing…

Here is a piece he shared last week about the Jesuit intellectual Baltasar Gracian. Enjoy!

Market Wizard’s Wisdom

Better Than Machiavelli

There’s a book sitting on the shelves of some of history’s sharpest minds, and yet most people have never heard of it. Nietzsche called its author “Europe’s greatest moralist.” Schopenhauer translated the book himself and kept it on his nightstand.

A Spanish Jesuit priest named Baltasar Gracián wrote The Art of Worldly Wisdom in 1647. It’s a collection of 300 short maxims about how to move through the world without being eaten alive by it. Each one is a golden nugget of practical wisdom, the kind that makes you put the book down and stare at the ceiling for a minute.

Gracián wasn’t writing for idealists. He was writing for people who had lived enough life to know that talent alone doesn’t win, good intentions get you nowhere without social intelligence, and the world judges you not by what you meant but by what happened. In other words, he wrote for adults. He wrote, in many ways, for people who are exactly the age you are now — old enough to have been burned a few times, wise enough to want a better map.

Here are five things Gracián understood about life that most people spend decades figuring out on their own.

1. Prudence Is Not Timidity — It’s the Master Skill

Gracián elevates prudence above all other virtues. As Gracián defines it, prudence is the ability to see clearly, think ahead, and act deliberately rather than reactively. “It is far easier to prevent than to rectify,” he writes.

How many professional problems, strained friendships, or financial headaches in your own life began because someone (you, or someone around you) acted on impulse when a pause of five minutes might have changed everything? Gracián’s point isn’t that you should be slow or fearful. It’s that the person who anticipates — who thinks two moves ahead the way a chess player does — operates with an enormous advantage over everyone reacting to the present moment.

He also warns against staking everything on a single outcome. Don’t put all your hopes, your identity, your security into one throw. This is the kind of thinking that keeps you resilient when things, as they inevitably do, go sideways.

2. You Can’t Lead Anyone Until You Can Lead Yourself

“First be master over yourself if you would be master over others.” It’s one of those lines that sounds like a fortune cookie until you really sit with it.

Gracián argues that self-knowledge and self-discipline are virtues and prerequisites for effectiveness in the world. Vanity drives a person to make poor decisions because their ego is doing the thinking. The person who can’t control their temper telegraphs their vulnerabilities to everyone around them. The chronically anxious person sees threats that aren’t there and misses opportunities that are.

Gracián asks for an honest self-inventory. Know your chief fault — the tendency that most reliably gets you into trouble — and work on it with the same seriousness you’d bring to any important project. For some people, it’s stubbornness. For others, it’s the need for approval, or a sharp tongue, or a habit of catastrophizing. Whatever it is, it will cost you until you name it.

There’s something particularly useful about this at midlife and beyond. By 55, most of us have enough history with ourselves to actually do this exercise honestly. We know what our patterns are. Gracián simply asks whether we’ve decided to do anything about them.

3. Reputation Is Capital — Spend It Carefully

This is where Gracián sounds most modern, because what he’s describing is something we now understand intuitively in the age of professional networks and social media: your reputation precedes you into every room you enter.

His maxim is “Do, but also seem.” He’s not encouraging phoniness. He’s making a cold-eyed observation that doing excellent work in obscurity produces far fewer results than doing excellent work and being known for it. As he says bluntly, the world judges outcomes. The project that failed spectacularly will be remembered long after the ten that quietly succeeded.

This means being economical with your words. Know that unnecessary talk, clever criticisms, and casual disparagement of others all leave residue. The person you mock at dinner tonight might be the person whose opinion matters in three years. The colleague you undermine in a meeting will remember. Gracián counsels a kind of social restraint that isn’t about being inauthentic but about understanding that everything you do and say is a deposit or a withdrawal from an account you’ll need to draw on later.

He also notes the particular danger of making enemies of people who have nothing to lose. Someone with status, reputation, and a future has reasons to behave with restraint. Someone with none of those things has no such incentive. It’s a point that sounds ruthless but is accurate.

4. The People Around You Are Your Fate

Gracián writes that you should study human nature “as closely as any book,” and the reason is straightforward. The people you spend your time with shape who you become, what you’re exposed to, and what happens to you. Wise friends, he says, “engender success.” Foolish or envious ones do the opposite.

This isn’t about being calculating in your friendships. It’s about being honest about relationships having direction. They either pull you up or pull you down, expand your thinking or narrow it, energize you or drain you. Most of us know this instinctively but resist acting on it because cutting ties feels disloyal, or because familiarity is comfortable even when it’s limiting.

Gracián places special emphasis on mentors and protectors. These people are ahead of you, can teach you, and have already navigated terrain you haven’t reached. At 55, you may be that person for someone else now. But the logic works in every direction. Maintaining proximity to people who are wiser, more experienced, or more capable in areas where you want to grow is one of the highest-return investments you can make.

He’s equally clear about who to avoid: the malicious, the unstable, the envious, and anyone whose reputation would contaminate yours simply by association. Some of this is self-protection. Some of it is recognizing that certain people are genuinely toxic, not because they mean to be, but because that’s what they reliably produce.

5. Be Ethical. Be Adaptable. Know the Difference.

This is perhaps Gracián’s most nuanced point, and the one that most distinguishes him from simple cynicism. He is not telling you to be duplicitous, manipulative, or unprincipled. He is telling you that rigid moralism, the insistence on applying the same response to every situation regardless of context, is its own kind of failure.

Real wisdom, for Gracián, involves timing. Knowing when to speak and when to be quiet. Knowing when to press an advantage and when to let things settle. Knowing when a situation calls for flexibility rather than a principled stand that accomplishes nothing except making you feel righteous.

He accepts that the world is flawed and that you will sometimes need to practice reserve, hold your cards close, or decline to share everything you know or feel. This isn’t hypocrisy; it’s discretion. The difference between the two is intention and character. A person of integrity who chooses their moments carefully is very different from a manipulator who has no fixed values at all.

The deeper point is about adaptability. Have the capacity to see both the advantages and disadvantages in any situation, and to adjust without losing your core. In Gracián’s view, the person who can do this consistently is more effective and more stable, because they’re not perpetually at war with reality.

Wrap Up

The Art of Worldly Wisdom has survived nearly four centuries because it describes human nature, which hasn’t changed much. The social dynamics Gracián mapped in the courts and institutions of Habsburg Spain are recognizable in every modern office, family system, and community.

What makes it worth reading now, specifically, is that it rewards experience. Many of these maxims will land differently in your 50s or 60s than they would have in your 20s, because you’ve lived enough to recognize what Gracián’s describing. The person who made an enemy unnecessarily. The moment you spoke, when silence would have served you better. The relationship that cost you more than you care to admit. The opportunity that slipped by because you hesitated, or the one you rushed into.

Gracián’s book doesn’t moralize at you. It simply holds up a mirror to the world and asks whether you’re going to navigate it with your eyes open or closed.

At this point in your life, the answer should be easy.

We hope that you’ve enjoyed this week’s issue of HX Weekly…

Do you have any thoughts, questions, or feedback? Tell us more in the comment section or at [email protected].