Spring 2026

Q: We have seen new highs in key equity indexes and then pullbacks. It there a single indicator or market benchmark that you're looking at to gauge the health of the market?

At Arlington Financial, we prefer gauging market health by tracking broader market indices than the S&P 500, such as the MSCI All Country World Index, which is made up of around 63% US and 37% international stocks. We like to look at how broad global markets are performing to get a good idea of how rationally investors are behaving across market cycles.

Prudent long term investment behavior historically rewards investors who don’t chase the most expensive stocks/markets and favor overlooked ideas. A good example is Warren Buffett’s substantial investments in the major Japanese diversified conglomerates over the past 6 years. As we have noted in recent Roundtables, international markets have been historically cheap relative to the S&P 500 for several years. Even after strong outperformance over the past year we believe they are still attractive, even in the face of the new war in Iran, as the US government continues to pursue weaker dollar policies like tariffs and deficit spending.

 Q: Private Credit and Crypto have been sharply sold off. Is this a warning sign or a healthy correction?

 We think the recent selloff in Private Credit markets is a warning sign that lenders and their investors have been stretching too much for yield. Private Credit has not yet faced major defaults. This higher risk lending, once borne by banks and high yield bonds, carries volatility which has been hidden by the illiquid structure of the vehicles marketed to investors. There will be fallout; underwriters with strong discipline should be fine, but the ripples from inevitable bad deals could turn into waves that hit the economy in unpredictable ways. The good news is that major banks no longer carry many of these types of loans on their balance sheets, lessening systemic risk.

Crypto’s recent selloff is relatively meaningless to us because there is little to no fundamental basis to its price at any given point in time. Crypto has also not acted as a diversifier against stock volatility or inflation. Caveat Emptor!