THE DEAN’S LIST: Good News Hidden in Plain Sight

Dean’s note:
 This week gave us two numbers that actually matter: jobs and inflation. Both came in better than expected. Jobs surprised everyone - 130,000 added in January versus the 55,000 economists predicted. Inflation cooled to 2.4%, the lowest in eight months.

Meanwhile, the headlines kept screaming about software crashes and Bitcoin wobbles. Here's what I want you to see: the scary headlines are about things that got overheated. The quiet story is that the foundation is getting stronger. The labor market isn't collapsing. Inflation is cooling. The Fed has room to breathe. If you're diversified, you're doing fine. If you're concentrated in a handful of tech stocks, you're learning an expensive lesson. The rotation continues. Stay zoomed out.

This week was quieter than last week's chaos, but the data that dropped was important. Two government reports - delayed by the shutdown - finally arrived. Here's what happened and what it means:

Monday–Tuesday: Markets drifted sideways. Software stocks continued to bleed from last week's AI fears. Bitcoin hovered around $68,000–$70,000, still licking its wounds.

Wednesday: The delayed January jobs report landed. Nonfarm payrolls jumped 130,000—way above the 55,000 expected. Unemployment ticked down to 4.3%. Markets initially cheered, then gave back gains as traders realized this means fewer rate cuts.

Thursday: Stocks slipped. The S&P 500 fell 1.6%. Cisco crashed 12% on weak guidance. Bitcoin dropped back toward $66,000. The "good news is bad news" trade kicked in—strong jobs mean the Fed stays on hold longer.

Friday: The CPI report dropped. Inflation came in at 2.4% annually—below the 2.5% expected and the lowest since May. Markets steadied. The data confirmed: inflation is cooling, even if it's not dead yet.

HALO stands for Heavy Assets, Low Obsolescence. Think pipelines, railroads, grocery stores, oil refineries. Businesses that move physical stuff, not digital bits. The idea is simple: ChatGPT can write code, but it can't pump oil out of the ground or deliver your groceries.

In 2026, investors piled in. Exxon and Chevron quietly beat stretches of Big Tech. Walmart and Costco now trade at prices that would've seemed crazy for "boring" retail stocks a decade ago. Caterpillar and Union Pacific aren't treated like cyclical plays anymore—they're treated like toll booths on the global economy.

Here's the catch: when everyone rushes into the same hiding spot, it stops being a hiding spot. Consumer staples now trade at 22–25x earnings. Some industrials are more expensive than the software stocks people fled. The HALO trade made sense when it was cheap. At these prices, you're not buying fear anymore. You're buying what everyone else already bought.

Dean’s note:
The bigger takeaway is this: the market is broadening. It's no longer just five mega-cap AI names dragging the index higher. Equal-weight is beating cap-weight. Small caps are participating. Value is catching a bid. HALO multiples are expanding.

These are all symptoms of the same shift - breadth is improving. The debate isn't whether AI matters. It's how much investors are willing to pay to avoid being disrupted by it. When the "safe" trade gets crowded, the easy money has already been made. That doesn't mean HALO is dead. You’ve learned along the way how tough it is to pick individual stocks. You’re right for a while and then you feel completely shellshocked. Or it happens at first in reverse and then you’re wrong again. Be careful out there.

The January jobs report was a shocker. Employers added 130,000 jobs - more than double what economists predicted. That's the best month since December 2024. Healthcare led the way with 82,000 new positions. Construction added 33,000. The unemployment rate dipped to 4.3%.

But not everything was rosy. Federal government jobs fell by 34,000 as deferred resignations from last year's cuts finally hit the payroll. Financial services shed 22,000 positions. And the 2025 job numbers got revised down -way down. Turns out last year only averaged 15,000 jobs per month, not the 49,000 originally reported.

Still, January's number matters. It shows the private sector is hiring again. It shows the economy isn't rolling over. And it gives the Fed cover to be flexible on rates.

Dean’s note:
Here's what this means for your money: a strong jobs report makes rate cuts more and less urgent all the same time. Markets now expect the first cut in June or July, not March. We don’t know what Kevin Warsh thinks just yet. He may be able to twist this narrative into a case for more rate cuts sooner.

The economy doesn't need emergency help, yet the spectre of AI-powered labor force disruption looms nearby. Lower rates would be nice for your mortgage and your bond prices, but an economy that doesn't need rescue is better than one that does, they say. Maybe. There are enough cracks for the Fed to justify additional support in a proactive way. We will see how this plays out in confirmation hearings soon enough.

Friday's CPI report was the good news hiding in plain sight. Consumer prices rose just 2.4% over the past year - down from 2.7% in December and the lowest reading since May 2025. Core inflation, which strips out food and energy, came in at 2.5% - the lowest since March 2021.

What's driving the cooldown? Gas prices fell 7.5% from last year. Shelter costs, which make up a third of the index, finally slowed down. Egg prices - remember when those were a crisis? - are down 34% from a year ago.

Some things are still expensive. Airfares jumped 6.5%. Ground beef is up 17%. Coffee is up 18%. But the overall trend is clear: the worst of the inflation spike is behind us.

Dean’s note:
At 2.4%, we're close enough to the Fed's 2% target that they can claim progress without lying. This matters for your money because it gives the Fed room to cut rates later this year.

Lower rates help your mortgage refinance, your bond prices, your small-cap and tech stocks for different reasons, and also your real estate. This is good news hiding in plain sight while everyone obsesses over Bitcoin and software crashes.

Bitcoin spent the week bouncing between $66,000 and $70,000. That's down more than 45% from its October high of $126,000. The Fear & Greed Index hit its lowest reading ever. Retail investors are panicking.

The bounce from last week's $60,000 scare was encouraging, but the price hasn't been able to break higher. Analysts are split. Some see $50,000 as the next stop. Others think the long-term case - limited supply, institutional adoption - is still intact.

What's causing the pain? The same forces hitting everything speculative: risk-off selling, forced liquidations, and a general flight from anything that went up too fast in 2024.

Dean’s note:
Here's what I've learned from watching cycles: the moment everyone gives up is usually close to the bottom. Not always. But often enough that panic-selling is rarely the right move. I'm not telling you to buy Bitcoin. I'm telling you not to sell it at the worst possible moment just because headlines are scary. If you own it as a small piece of a diversified portfolio, do nothing. Let the dust settle. The best move for most people right now is patience, not panic.

The rotation story got quieter this week, but it didn't stop. The Dow is holding above 50,000. The Russell 2000 is still up about 6% for the year. The equal-weight S&P 500 keeps beating the cap-weighted version.

Meanwhile, the Nasdaq is struggling. Software stocks are still bleeding. The Magnificent Seven are no longer uniformly magnificent. This is what market broadening looks like - it's not exciting, but it's healthy.

Small caps still trade at a big discount to large caps. International stocks are outperforming the S&P 500. Value is beating growth. These aren't one-week trends. They've been building for months.

Dean’s note:
If you're diversified across small caps, equal-weight indexes, international stocks, and commodities, you're doing better than the headlines suggest. The portfolios doing best in 2026 are the ones that didn't bet everything on seven stocks. That's not a coincidence. That's diversification working exactly as designed. Don't let a choppy week shake you out of a sound strategy.

Quiet weeks are often the important ones.

This week felt quiet after last week's chaos. But the quiet weeks are often the important ones. Two government reports - jobs and inflation - told us the economy is on solid ground. That matters more than any daily swing in Bitcoin or any software stock getting hammered.

The foundation is stronger than the headlines suggest. Jobs beat. Inflation cooled. The Fed has room to maneuver. If you built a diversified portfolio, you're being rewarded. If you chased the hot thing, you're learning a lesson.

Here's my framework for the rest of February:

• Stop checking your portfolio every day. The CPI and jobs numbers matter. The daily noise doesn't.

• The inflation win is bigger than you think. At 2.4%, the Fed has cover to cut rates this summer if needed. That's good for almost everything you own.

• Nvidia earnings on February 25. That report will set the tone for AI stocks. Mark your calendar, but don't panic either way.

• Keep adding to your 401(k). The $24,500 limit is in effect. If you're 60–63, the super catch-up lets you put in $35,750. Use it.

• Stay diversified. The Dow is above 50,000. Small caps are up for the year. The Nasdaq is struggling. That spread is why you don't put all your eggs in one basket.

• Be careful with the HALO trade. Owning things AI can't replace made sense when those stocks were cheap. At current prices, you're paying for safety that the smartest folks in the room already found.

The rotation is real. The data is better than the headlines. Disciplined investors are being rewarded. Stay zoomed out.

— Dean

P.S. Inflation at 2.4% means your savings account isn't losing purchasing power as fast as it was a year ago. But it's still losing. That's why we invest. Cash is for emergencies, not wealth-building. Build your plan and stick with it.

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