BiQ Journal: My Thoughts on Current Market Volatility (02/05/26)

It's been a crazy week, and while I've been providing regulate updates in Chat and carefully monitoring the names in the BiQAP, I haven't had as much time to write as I would like, so I thought this might be a good opportunity to provide my perspective on current market conditions.

The bottom line is, no matter how good your investment selections may be, it's virtually impossible to fight market downturns. Nothing has changed in the theses for any of the names we follow at BiQ, both in the core BiQAP, as well as the non-BiQAP names we follow in Chat. However, when the market falls, it takes all boats with it. What makes it more difficult is these types of events are also almost impossible to predict; after all, if they were predictable, we wouldn't have days like today. But that doesn't stop us from second guessing ourselves.

There are lots of narratives floating around. Is AI overbuilt? Or is it going to crush software companies? Apparently, both narratives are floating around. Are investors abandoning crypto, even though government and corporate ownership trends are growing? Is blockchain just a toy after all, even though companies like JP Morgan, Bank of America, and even the DTCC, are increasingly tokenizing transactions on networks such as Canton?

I think narratives are dangerous, mostly because they are almost always designed to prey on alternating fear and hope. The hardest part of navigating the market is staying disciplined and keeping enthusiasm in check when markets are rising, while keeping fear in check when markets are falling. There's a reason many seasoned investors will tell you that successful investing is as much about mastering your emotions as it is about investment selection.

That said, I do think there are several risks that the US markets are exposed to, but none of them are new:

• Ongoing political chaos in the US.
• Foreign countries selling US assets due to recent shifts in US foreign policy.
• Recession fears, heightened by tariffs and seemingly haphazard domestic policy decisions.
• Long-term rates being driven up by inflation and decreasing international appetite for USD and UST assets.

These are just a few that are top of mind. On the other hand, there are also several potential tailwinds:

• Continued efficiency gains driven by AI adoption.
• Global increase in aerospace and defense spending driven by a shifting world-order and loss of faith in alliances.
• Large investments in infrastructure, AI, robotics, space, etc.
• Infusion of capital into markets resulting from corporate tax cuts in the BBB (Big Beautiful Bill), such as the repatriation holiday and increased tax breaks for corporations and high net worth individuals.
• Potential decrease in short-term rates.

Scanning through BiQ chat the last couple of days, I'm very happy to see that most BiQ members who participate in Chat seem to be staying reasonably calm. Of course, things could get harder if this downturn continues, but we'll cross that bridge if and when we come to it.

In the meantime, it's important to stay focused on why we chose to invest where we did. If the thesis is still solid, then it may just be a matter of patience and waiting for the thesis to play out. Market volatility will come and go; the market is very unpredictable over the short term. Over the long term, however, good names will almost always float to the top if we stay disciplined.

This doesn't mean there isn't a time to sell. If we find ourselves overstretched, there's nothing wrong with selling positions to raise capital; however, it's important to be responsive to market conditions, not reactive. As market conditions change, so does our appetite for risk. It's always a healthy exercise to re-evaluate our risk exposure, and even more so during times of high volatility.

As always, I will continue to monitor all BiQ names and update members if anything changes in the theses. Other than that, my plan is to monitor market conditions and only take action as needed. I am in no hurry to buy anything, because it's impossible to know how long this selloff will last, or how deep it will go.

One final thought. In the short term, markets are not always rational. As small retail investors, we don't have access to the same resources and information that large investors do. During times of volatility, large investors often stay on the sidelines until they feel enough margin has been squeezed out of the system, and enough small investors have been paralyzed by fear or have thrown in the towel. That's when they start scooping up assets on the cheap.

The stock market is a triumph of ingenuity that allows us, as small retail investors, to participate in the fortunes of successful companies. However, it can also be a wealth transfer mechanism, where large investors often seek to prey on the alternating hopes and fears of small investors. The way to protect yourself is to stay disciplined, focused and rational.

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