When Information Is Plentiful, Discipline Matters Most

January 2026

 

One of the enduring challenges of investing is that clarity is often least available when we most want it.

As 2026 begins, markets remain near all-time highs, yet the path has been uneven in the last year. Interest rate expectations have fluctuated, artificial intelligence continues to dominate discussions and political and geopolitical developments have contributed to heightening day-to-day volatility.

Against this backdrop, investors are faced with a steady flow of new information, with each data point seemingly inviting interpretation, prediction and action. This raises an important question for long-term investors: when new information is abundant but clarity is scarce, how much confidence should we have in our ability to predict the short term?

THE LIMITS OF NEAR-TERM PREDICTION

Investors are naturally drawn to prediction. If we could consistently anticipate interest rate changes, economic shifts or market turning points, making portfolio decisions would be much easier.

However, the reality is that short-term forecasting is extremely challenging and frequently inaccurate. Economic data is far less precise than it seems, with key indicators often revised—sometimes significantly—months or even years after they are first released.

Meanwhile, markets react in real time to preliminary figures that may later prove to be incomplete or inaccurate. Political and policy developments may appear decisive at the time, but can then be softened, delayed or offset by other forces.

Looking back just twelve months, few investors would claim to have accurately predicted the events of 2025. Yet, at the time, confidence in short-term forecasts was widespread. This mismatch between perceived and actual forecasting ability is one of the most persistent sources of investment error.

When investors act on short-term predictions that later turn out to be incorrect, the consequences are rarely limited to foregone returns. Rapid shifts in positioning can lead to regret, emotional decision-making and missed opportunities, particularly when markets recover faster or further than expected.

INTERPRETING TODAY’S ENVIRONMENT

Viewed in this way, the current situation is less confusing than it seems. Markets have been pulled in different directions by uncertainty surrounding interest rates, enthusiasm for new technologies and political noise.

Over the past year alone, investors have moved from fearing persistent inflation to anticipating rapid rate cuts and to debating whether economic resilience itself poses a risk. This sequence illustrates how quickly confident narratives can reverse and how unreliable near-term predictions can be.

What remains unknown is how these forces will evolve in the coming quarters. What is certain is that businesses continue to adapt, invest and grow in a variety of conditions.

History suggests that markets often move ahead of certainty, not after it. This is why waiting for clarity can result in missing out on opportunities. Importantly, the presence of uncertainty does not automatically imply elevated long-term risk.

More often, it reflects markets’ normal functioning as they process incomplete information. The challenge for investors is recognizing when uncertainty is simply uncomfortable rather than genuinely threatening.

PEMBROKE’S APPROACH

At Pembroke, we designed our investment process with these realities in mind. We do not believe that consistent success comes from accurately predicting short-term outcomes.

Instead, we believe it comes from maintaining discipline around a well-defined plan, particularly when the temptation to react is greatest. We focus on identifying high-quality businesses with strong balance sheets, durable cash flows and management teams that can navigate change. While these characteristics do not eliminate volatility, they help to reduce the likelihood of permanent capital loss across cycles.

Behaviour is equally important. We resist the urge to trade simply because new information has emerged. This requires humility about what can and cannot be known in the near term.

Often, the most constructive decision is to maintain the current course and ensure that portfolios remain aligned with long-term objectives. In this context, inaction is not passivity. Rather, it is an active choice to avoid unnecessary adjustments driven by short-term noise, and to remain committed to an investment plan built for a wide range of potential outcomes.

STAYING DISCIPLINED

As we move further into 2026, it is unlikely that uncertainty will fade. Markets will continue to react to new data, changing expectations and evolving narratives.

This is not a sign that something is broken; it is simply how markets function. The greater risk for investors is not uncertainty itself, but the belief that it can be reliably navigated through short-term prediction.

Experience suggests that patience, discipline and consistency are more valuable than frequent adjustments. The most valuable decisions are often the least dramatic: resisting the urge to react, staying aligned with a long-term strategy and recognizing that not every new piece of information requires a response.

In investing, distinguishing between what demands action and what merely demands patience is often the difference between participating in long-term compounding and repeatedly interrupting it.

 

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