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- Short-Termism š Mispricings
Short-Termism š Mispricings
+ Ray Dalio, Citadel, Scott Goodwin, Scott Belsky, Dan Wang & More
The Idea Farm
January 11, 2026
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āI would recommend zero exposure to the US, but if you have to own US stocks, own quality stocks.ā
Research
AllianceBernstein maps a wider set of equity return drivers for the year ahead, urging investors to diversify beyond US mega cap tech and plan for volatility. They point out global equities rose 22.3% last year, showing leadership can broaden across regions and styles.
Citadel Securities - 2026 ā Q1 Outlook (24 pages)
Citadelās Scott Rubner says the U.S. economy enters 2026 with resilient growth, broadening profit drivers and a policy mix that remains supportive of risk assets. He highlights five main pillars that he believes will shape early-2026 market behavior.
He also elaborated on these themes earlier this week.
Source: Bloomberg as compiled by Citadel Securities, GMI, as of December 18th, 2025.
From 2009 to 2024, the S&P 500 generated 3.6x the return of the MSCI World ex-US Index. In 2025 the US finally underperformed most equity markets, leaving the S&P 500 vs rest of world multiple since 2009 at 3.0x.
Michael Cembalestās outlook focuses on four medium term risks: US power generation constraints, China scaling the moat on its own, Taiwan and a āmetaverse momentā for hyperscaler profits after $1.3 trillion of capex and R&D.
Research Affiliates - Financialization: How Deficits Inflate Profits and Equity Valuations (10 pages)
Research Affiliates argues chronic fiscal deficits can flow almost one for one into corporate profits, then passive indexing mechanically capitalizes those profits into higher valuations, leaving equities exposed if fiscal support fades.
Source: BEA NIPA Table 1.12 (Compensation of Employees, National Income).
The authors analyze how institutional short-termism leads to predictable mispricing, showing that firms held by long-horizon investors earn higher returns due to reduced myopia and longer holding periods.
Bonus Content
J.P. Morgan published their year-end Guide to the Markets. Link
The Trump Administration published their 2025 National Security Strategy. Link
Dan Wang, who previously covered tech for Gavekal Dragonomics is the author of Breakneck: China's Quest to Engineer the Future, wrote his 2025 annual letter. Link
Scott Belsky shared 12 things he expects to see in the coming yearish. Link
A mystery trader made $400,000 betting on Maduroās downfall, doubling down with a final bet on Polymarket at 9:58 p.m., shortly before President Trump ordered the military to strike. Link
Ray Dalio looks back at 2025. Link
āWhile most people see US stocks and particularly US AI stocks to be the best investments and hence the biggest investment story of 2025, it is indisputably true that the biggest returns came from 1) what happened to the value of money and 2) US stocks significantly underperforming both non-US stock markets and gold.ā
When Tax-Loss Harvesting Becomes Portfolio Deadweight
Many tax-loss harvesting portfolios eventually reach a dead end: the losses are gone, contributions have stopped, and what remains is a web of small positions and legacy ETFs.
For portfolios like this, a Section 351 exchange may offer a path to consolidation without triggering capital gains at the time of exchange, if eligibility requirements are met.
Alpha Architect takes an education-first approach to 351 exchanges. Our 351 Education Center includes short videos, visual walkthroughs, and practical resources designed to help advisors understand how these exchanges workāand when they may or may not apply.
Explore Alpha Architectās 351 Education Center to see how 351 exchange funds are being used to address āfinishedā TLH portfolios and other complex scenarios.
Podcasts
 11/19/2025 - 45 minutes | Eli Lillyās Dave Ricks discusses drug innovation, scaling a healthcare giant, and balancing pricing and patient access. |
 12/18/2025 - 33 minutes | Diameter Capitalās Scott Goodwin talks about his career, his investment philosophy, and how heās navigating opportunities across the credit spectrum. |
 9/11/2025 - 68 minutes | Thomas Stephens discusses his evolution from losing bettor to professional sports bettor, lessons learned, and the realities of the industry. |
What Else Is Happening
Did you miss last weekās email?
The Meb Faber Show featured episodes with 15 authors in 2025. Check out the full list of books and episode links.
