The Signals and Noise

Ending February 13, 2026

A Members Message 

Last Friday, February 6th, the ASX fell around 2% which is a pretty big move in the scheme of things. However, when we look at history, we see that these 2% days are not that common but also not unexpected as they occur a few times, and are especially common in bear markets or when the overall market is below the 200 moving average.

These days can shake investors as no-one really likes higher volatility especially when it is unexpected. We get caught up in the day's events, the media start running gloomy headlines feeding the nervousness. 

However, by Wednesday the following week, the ASX had recovered all the 2% and ended the week well clear of the previous week's low. 

One surprising element of markets is they spend more time in a drawdown state and a recovery state than they do at higher level.

What does this mean? 

It means markets spend more time going down and returning to their original position (whatever that is). 

So while the finance folks talk incessently about rising markets, they actually spend more time recovering their previous position.

This snapshot this tells you why rebalancing is critical to returns. If you don't panic, you can calmly rebalance acording to your strategy and benefit from volatitlity rather than fear it. 

And the good news is that markets spend time making all time highs. It's not a lot of time, around 7-10%, but it is important because it again highlights one of our investment principles (risk) which is to focus on index and sector ETFs rather than individual company stocks. 

Companies can fall and never return to previous highs. As I mentioned before, Woodside for example peaked around $66 in June 2008 and has fallen to a low of $18 in April 2020. Ouch.

when you rebalance you need to think about the time spent getting back to your purchase price and to do that youneed to hold some cash which allows you to buy more when the price fall. It may take some time but markets generally rise to reach all time highs and that is when you can rebalance by selling rather than rebalance by buying. 

So don't fear lower prices as they give you an opportunity to buy more and in some ways lock in future profits.

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