Sep 16, 2026 · 26 min
Investors confront emotion, AI volatility and higher yields
Why human emotion is the biggest threat to your portfolio
The discussion tests whether market weakness reflects a broken economic thesis or investors reacting too quickly to uncertainty.
- 1Human reactions to alarming headlines can damage portfolios more than weak company fundamentals.
- 2Higher Treasury yields may compress stock valuations without necessarily signaling an economic crisis.
- 3Investors should track data, cash-flow potential and thesis changes instead of panic-selling volatility.
Don't miss
Adam Johnson and Kenny explain how algorithms can rapidly parse earnings releases and amplify volatility before human investors assess the details.
The brief
Julian Koski and Adam Johnson open by questioning whether stretched sectors and AI fears are making investors mistake volatility for deteriorating fundamentals.
The central argument is behavioral: emotion can create more portfolio risk than company weakness, while Koski and Johnson use different methods to assess risk and future cash flow.
Fed policy, inflation and elevated Treasury yields could force stock-market adjustments and lower valuation multiples, but the guests distinguish slower growth from an economic crisis.
As algorithms amplify earnings reactions, the panel urges investors to ask whether a company can deliver the growth its share price implies and whether its thesis has actually changed.
The guests expect volatility around the midterms but point to solid earnings, employment and economic conditions, while treating wars and other global events as hard-to-price risks.
What was said on this episode
73 statements · 43 positive · 17 negative · 1 mixed · 12 neutral
Stocks are currently among the market’s most undervalued assets.
“this moment in time right now is some of the most undervalued. uh stocks”
Listen at 1:04
Stock-market fundamentals are currently very strong.
“the fundamentals are very, very strong”
Listen at 1:34
Anticipating market moves increases investment risk.
“anticipating it actually creates a bigger risk”
Listen at 2:24
Software has become a practical use case for artificial intelligence.
“software has become an AI use case”
Listen at 2:40
Some software companies trade at 12–13 times earnings despite 20–25% growth.
“some of these companies... have been trading at 12, 13 times earnings, and yet they still have 20 to 25% growth”
Listen at 2:49
AI development does not need to be slowed down because of current fears.
“the AI scare, oh my gosh, we have to slow it down. No, you don't need to.”
Listen at 3:02
AI companies can regulate artificial intelligence themselves.
“you can regulate it yourselves”
Listen at 3:06
Very few people understand artificial intelligence.
“There are very few people who understand AI.”
Listen at 4:09
The government does not understand artificial intelligence adequately.
“the government doesn't understand AI”
Listen at 4:20
Artificial intelligence is capable of self-regulation.
“AI is perfectly capable of regulating itself”
Listen at 4:35
Most companies use AI models that are approximately two years old.
“Most companies. are using models from two years ago”
Listen at 4:43
Most companies use AI models that are about two years old.
“Most companies. are using models from two years ago.”
Listen at 4:43
Frontier-model risks do not generally apply to the average S&P 500 company.
“if you're worried about the risk at the average S&P 500 company, no”
Listen at 4:47
Human behavior is the biggest risk to an investment portfolio.
“human behavior is the biggest risk to a portfolio”
Listen at 5:40
Risk management should prioritize avoiding losing investments over picking winners.
“the absolute goal is to try and be less wrong, right? Just, you know, get rid of the losers”
Listen at 7:48
Risk management should prioritize avoiding losers over picking winners.
“the absolute goal is to try and be less wrong”
Listen at 7:48
Adam seeks companies whose cash flow may double or triple over several years.
“I'm trying to find companies where I think cash flow will double or triple. over the next several years”
Listen at 8:07
Some selected companies’ cash flow will double or triple over several years.
“cash flow will double or triple. over the next several years”
Listen at 8:09
Adam buys stocks with potential price targets two to four times current prices.
“if I can get to a price target that's two, three, four times higher than where the stock is, I buy it and I leave it alone”
Listen at 8:18
The Federal Reserve will leave policy unchanged at the upcoming meeting.
“I'm in the camp that the Fed does nothing”
Listen at 9:43
The Federal Reserve will leave policy unchanged at the upcoming meeting.
“I'm in the camp that the Fed does nothing.”
Listen at 9:43
The Federal Reserve should leave policy unchanged.
“I don't think they should do anything.”
Listen at 10:15
The Federal Reserve should leave policy unchanged.
“I don't think they should do anything”
Listen at 10:15
The Fed must justify a decision to leave policy unchanged.
“if they do nothing, they have to justify why they did nothing”
Listen at 11:09
Elevated Treasury yields may represent appropriate monetary and market adjustment.
“a combination of the Fed and the market pushing yields to 20-year highs is ultimately a way of getting it right”
Listen at 11:39
Consumer inflation is currently declining toward a better direction.
“inflation at the consumer level is going the right way.”
Listen at 13:15
Consumer inflation is currently declining toward a better level.
“inflation at the consumer level is going the right way”
Listen at 13:15
The leading economic indicators imply a fundamentally sound economy.
“that's telling you that the underlying economy is fundamentally sound and good”
Listen at 13:32
Leading indicators show the underlying economy is fundamentally sound.
“the underlying economy is fundamentally sound and good”
Listen at 13:33
The economy is strong and not near recession.
“I think the economy is strong. I don't think we're anywhere near a recession or a bad time.”
Listen at 14:05
GDP growth is currently around four percent.
“GDP is growing somewhere in the fours”
Listen at 14:33
GDP growth is currently around four percent.
“GDP is growing somewhere in the fours.”
Listen at 14:33
The economy is creating more than 100,000 jobs monthly.
“We're creating more than a hundred thousand jobs per month”
Listen at 14:41
Persistently high diesel prices could spread inflationary pressure through the economy.
“If it stays elevated like this, then there is that possibility that it's going to make its way down into other parts of the economy”
Listen at 15:33
The economy can tolerate oil prices averaging $85 per barrel.
“We've already proven to ourselves that we can live with $85 oil. It's not a sky is falling scenario.”
Listen at 16:10
Oil-price developments are primarily dependent on the Middle East conflict.
“The oil narrative is completely dependent upon one thing, the conflict in the Middle East.”
Listen at 16:27
Maintaining an 80/20 allocation would have produced higher returns except during 2008.
“if you had stayed 80-20 throughout that entire process, other than 2008, where you probably should have gone to cash, right? You would have made a lot more money.”
Listen at 17:39
Investors should remain invested rather than sell emotionally.
“100% you have to stay invested”
Listen at 17:58
Investment exposure should follow data rather than anticipated market moves.
“we let the data tell us where to go. we're not going to try and anticipate where to go.”
Listen at 18:16
The model adjusts market exposure using LEI, VIX, momentum, and another measure.
“it will modulate the exposure to the market. based on those four measures.”
Listen at 18:39
LEI, VIX, momentum, and related measures show no serious negative signal.
“they're not saying anything bad is the point.”
Listen at 18:58
The model's four indicators currently signal no serious deterioration.
“they're not saying anything bad is the point”
Listen at 18:58
Current market and economic conditions offer more positives than risks.
“There is so much more to like right now than to fear”
Listen at 19:05
Current market and economic conditions offer more positives than risks.
“There is so much more to like right now than to fear.”
Listen at 19:05
Investors may temporarily shift 10–20% of growth allocations into Treasuries.
“if you want to take 10, 15, 20%, whatever it is of the money that you've allocated to growth and just say, you know what, for a little bit of time, I'm just going to put it into T-bills or 10-year treasuries”
Listen at 19:56
A 5% Treasury return is a legitimate investment return.
“5% is a legitimate, Correct. Return”
Listen at 20:08
A 5% Treasury return is currently a legitimate investment return.
“5% is a legitimate, Correct. Return.”
Listen at 20:08
A 5% Treasury return makes cash a legitimate investment asset.
“5% is a legitimate, Correct. Return. All of a sudden, cash is a legitimate asset.”
Listen at 20:08
Stocks can continue delivering growth despite higher yields.
“I actually see stocks are able to deliver.”
Listen at 20:29
Stocks can continue delivering growth despite higher yields.
“stocks are able to deliver”
Listen at 20:29
Corporations will find ways to generate growth despite higher capital costs.
“These corps will go back into business and find ways to generate more growth”
Listen at 20:38
Companies can generate growth despite a higher cost of capital.
“With a higher cost of capital. That's all it is.”
Listen at 20:43
Higher capital costs will reduce exceptional earnings to merely good earnings.
“instead of having brilliant, great earnings like we've just had, you'll have good earnings.”
Listen at 21:02
The S&P 500 may revalue from 22–23 times earnings to 19–21 times.
“the S&P, instead of trading at 22 to 23 times earnings, will trade at 20 to 21. Exactly. Maybe 19.”
Listen at 21:10
Algorithmic earnings checks can cause a stock to fall 10% when one metric misses.
“if any one of them is wrong, boom right suddenly the stock's down 10”
Listen at 21:54
Technology reacts immediately to headlines and increases market volatility.
“the tech reacts immediately right which adds to the volatility”
Listen at 22:19
Investors should assess whether companies can deliver growth implied by stock prices.
“can the company deliver the growth indicated by the stock price?”
Listen at 22:48
A lower stock price reduces the growth required to justify valuation.
“when there's an adjustment in the market and the stock price drops, the company has to actually deliver less to support that stock price”
Listen at 23:03
Investors should distinguish temporary price declines from changed investment theses.
“if the thesis is the same, it is. It hasn't changed.”
Listen at 24:20
The stock market will rise but remain volatile until the midterm elections.
“the stock market's going to be higher. I do think it'll be volatile until midterms.”
Listen at 24:39
The stock market will finish the year higher.
“the stock market's going to be higher”
Listen at 24:39
The stock market will remain volatile until the midterm elections.
“I do think it'll be volatile until midterms.”
Listen at 24:40
The stock market will remain volatile until the midterm elections.
“I do think it'll be volatile until midterms”
Listen at 24:40
Market clarity around midterms will be followed by further gains.
“once we get clarity, which may actually happen before the election, because usually the market figures it out, at that point, we are definitely going higher.”
Listen at 24:42
Stocks will rise after midterm-election uncertainty clears.
“at that point, we are definitely going higher”
Listen at 24:47
Markets will rise after greater midterm-election clarity.
“we are definitely going higher”
Listen at 24:48
Global events such as wars pose the larger investment risk.
“the bigger issue to me is a global risk”
Listen at 25:08
Wars and similar events represent the larger global investment risk.
“the bigger issue to me is a global risk. That risk is, you know, if there's wars and things like that.”
Listen at 25:08
Wars and geopolitical events represent difficult-to-price global risks.
“if there's wars and things like that”
Listen at 25:14
The U.S. economy is strong and investors should continue investing.
“I see the U.S. economy is strong, good, and keep investing.”
Listen at 25:21
The U.S. economy is strong, so investors should continue investing.
“I see the U.S. economy is strong, good, and keep investing”
Listen at 25:21
The Middle East conflict is unlikely to end before year-end.
“I'd be surprised, but thrilled.”
Listen at 25:30
An end to the Middle East conflict before year-end is unlikely.
“I'd be surprised, but thrilled”
Listen at 25:30
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.