I'm Playing Small Ball as Everything Is Coming Out of Left Field
Here's how I'm handling my investments as the news is getting wilder and wilder by the day.
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“There are decades where nothing happens, and there are weeks where decades happen.”
– Attributed to Vladimir Lenin
We are two weeks into 2026, and the year is already shaping up to be a memorable one. Whether this will be good, bad or indifferent for the economy or the markets is anybody's guess at this point. The leader of Venezuela has been forcibly removed by the U.S. under the cover of night. Cut off from imports of Venezuela’s crude oil, the communist regime in Cuba might be next. Nearly a half a century of rule by the mullahs in Iran might also be coming to an end as well. Leadership might hang on via even more repression or Persia could just descend into civil war. There is a plethora of possible outcomes and unknowns right now.
Here at home, tensions remain high as protests break out in Minneapolis and other major cities in response to aggressive immigration enforcement. The U.S. economy is booming, if one only looks at the gross domestic product growth figures of the past few quarters. Unfortunately, the K-shaped economy has most of the population struggling with lousy consumer sentiment readings reflecting that. That said, retail spending remains quite healthy on an aggregate basis.
Ahead of the mid-terms, the administration seems to be floating a new proposal or policy on a daily basis. Some are nonsensical like capping interest rates on credit cards at 10% or pursuing an indictment against the head of the Federal Reserve, who will be out of office in May regardless. Others, like Fannie Mae buying mortgage bonds to help revive the moribund housing sector, could be helpful on the margins. The fate of the administration’s tariff policies, a linchpin of their economic program remains in limbo and could be decided by the Supreme Court this week.
Meanwhile, JPMorgan Chase & Co. (JPM) kicked off fourth quarter earnings season on Tuesday, and investors will be digesting quarterly results via a fire hose over the next few weeks looking for clues on how the economy is impacting companies’ fortunes. And through all this, the equity markets have remained remarkably non-plussed by the cavalcade of news flow here in 2026.
The volatility index has risen slightly during this year, but does not reflect the uncertainty of this ever-shifting environment. I doubt this trend lasts for much longer, but I wouldn’t take that to the bank. Given my lack of feel for the markets and the historically high valuation levels, I am just playing small ball right now. I have deployed some of my additional dry powder within my portfolio that came to it after December’s option expiration into new covered-call positions in some defensive holdings like PepsiCo, Inc. (PEP) and Kimberly-Clark Corporation (KMB) . Both of these high yielding names have been touted by Doug Kass here in 2026 and are attractive in an uncertain market.
I have also nibbled around some relatively cheap small-cap names in what I continue to feel is an overbought market. More on those trades in Friday’s column
At the time of publication, Jensen was long KMB and PEP.
