Episode 78 | From the Fed to Big Tech: Navigating Markets in Early 2026

In Episode 78 of “Market News with Rodney Lake,” Professor Lake, director of the GW Investment Institute, delivers a comprehensive market update, reviewing year-to-date numbers from the S&P 500 and Nasdaq, current news at the Federal Reserve, and the performance of major holdings in the new year. The discussion explores key market themes including valuation concerns, inflation, and AI-driven developments. Professor Lake highlights Google’s Gemini 3.0 in contrast with AI strategies and competitive positioning across other companies. He also discusses Berkshire Hathaway’s post-Buffett transition as a contra investment to the AI trade. The episode ties in the Institute’s student-managed funds and experiential learning, reinforcing a measured approach to markets and key portfolio holdings.

Transcript

Thank you for joining Market News with Rodney Lake. This is a regular program for the GW Investment Institute where we talk about timely market topics. I'm Rodney Lake, the director of the GW Investment Institute. Let's get started.
Welcome back to Market News with Rodney Lake. I'm your host, Rodney Lake. This is a GW Investment Institute podcast in the School of Business. The George Washington University school of Business, that is. And we're here in Duquès Hall in the heart of Foggy Bottom, Duquès Family Studio. Welcome back. We took a week off. We had the weather here.
There's still plenty of snow outside if you're in D.C.. This is February 3rd, 2026 and it's been colder than normal temperatures. And so the snow has stuck around. And so everyone still digging their way out of here. But we're back in the studio. Thanks to everybody, to Jeff and Josh for making it all happen for us.
And of course, Susan. So what are we going to do today? Remember, educational purposes only and entertainment as well, not investment advice. Disclaimer also at the end. But we're going to do a general market overview today. So to catch us back up. So we missed a week. So let's you know let's kind of pull everything back together here.
Remember GW Investment Institute podcast. And so we're going to talk about the markets, you know an overview of what's been happening. And so there's a lot that's been going on. The markets continue to do fairly well. So we'll talk about sort of the year to date numbers, and we'll get into a couple of names. But there's obviously some big news out, that happened while we were, you know, stuck in the snow here.
Kevin Warsh was nominated as the Federal Reserve chair. So that's big news. He was one of the, you know, front runners for this. And so not completely unexpected. This person, Mr. Warsh, is eminently qualified. This job. He's been confirmed before, so he's nominated. Now he's got to go through the confirmation process. He has been a federal governor.
So not the chair, but a governor before. And so he's been confirmed before. This is obviously, for the chair role. And so we'll see how that plays out. But President Trump nominated Kevin Warsh for that role. Sticking with the fed, what did they do in their last meeting? They held rates steady.
Now there's this push and pull that's happening with rates right now. And obviously, Trump along with any other president for the most part, wants lower rates. And that's typical. You know, they want more, you know, borrowing that they certainly want more activity. And a lot of that is connected to what what, what's that's, you know, happening in the market around affordability.
And so you can see that that's lining up to be a big piece of that this year's election. So, believe it or not, 2026 already, it's going to be the midterm election. So affordability is going to play into that. So when you talk about lower rates then you're certainly talking about, you know, people buying homes. And this is a big part of what I think this administration and certainly really any other administration that's trying to tap into what people are thinking about, on the market side, but also on the politics side.
You know, for this year. So we'll see how that plays out. We'll see what Kevin Warsh does. You know, this is a hot take. I think he'll get nominated or not nominated. He got nominated already. I think he'll get confirmed. And so we'll see what happens. You know, there will be a push and pull on that.
Is this person qualified? I think very much so. Can there be, you know, consternation amongst people who are making these votes? Of course there can. And there needs to be some bipartisan, possibly, to make all this happen. But we'll see. We'll see how the nomination, process flows from here, or rather, the confirmation process flows from the nomination process.
And so we'll be paying attention and we'll report back to you, obviously, if there's anything for that. And again, back to the Fed overall, holding rates steady. So nothing to see there. No big change. Let's now check in on the broad indexes. And so the year has been a little bit up and down to say the least.
And so if you check in first here let's do the S&P and the Nasdaq, the two that we regularly check in. And most of our holdings are in these two indexes for the most part. Obviously we have some names sometimes that fall outside of those two indexes. But for the most part they're comprised, you know, the names that we hold a fewer number of names that are both in those indexes.
And so if you look at the S&P 500, the year to date number is 1.5%. And so again this is February 3rd, 2026 when we're recording this. And today the market's at 6948 up 1.5% year to date. So not a huge number. But you know, things are relatively good. You know, for, you know, the stock market.
And you have to think also that the valuation matters here. People are concerned about that on the S&P 500. But, you know, we'll have to see how that plays out for the rest of the year. And we'll talk a little bit about the valuation overall. But let's go change the Nasdaq now. So if you look at the Nasdaq the year to date number right now it's 23,357 is the level.
And that's up 0.5%. And there's been some back and forth in some of these companies. And we'll talk a little bit about, some of the companies in both of these, indexes and some of the companies obviously, that we hold. The Investment Institute, you know, obviously we're chugging along. Wanted to say a big thanks to our students who at the end of last semester got of our stock pitches in and we made the trades, the things that got approved.
And so, great fun and now we're back up and running for the spring semester. We're running finance 4101, which is the applied financial security analysis. So, you know, that's the single security fundamental analysis class. We also runing the quant class and the VC class. And so this will be a lot of fun this semester.
We'll see what you know comes out of these classes and what ideas come out of this. The students in the venture class will be pitching in the new venture competition, at least in the first round, and hopefully they make it further than that. In the quant class, they’re going to be building models. So I think that's going to be a lot of fun.
It's always interesting to see what type of model students come up, come up with. They build these in teams, and I think it's a really interesting way to learn about the quant world. The same as there are other classes learning by doing, and that fund has actually done fairly well. Also, it's one of our smaller funds, amongst the 11, just over $11 million of capital.
That's part of the overall endowment that our students manage. But I would have to say it's a super fun class. You know, shout out to the students have taken that class. And I think it's very instructive. Again, you're learning by doing. And if you're trying to get into the investment business, I think it's a great set up for you, even if you're not going to go specifically into the market is changing rapidly, and that's a bigger part of it.
So for this semester, we'll have to see how the ideas come out. Excuse me. Sip of water from my George Washington University mug. We'll have to see how that all comes out and see what ideas come out of this semester. All right so let's look at some news. Overall we talked about the Fed. Obviously they're trying to balance this out.
You know people are still concerned about inflation. But you're also concerned about growth. You're concerned about the unemployment situation. But it looks to be, you know, fairly stable, holding rates steady right now. You know, nothing to see here, as I mentioned. So what is happening? You're certainly looking for the market or many people are looking for the market to broaden out.
You know, you had the Mag 7, really pushing the last couple years here, the specific earnings and the growth of that in this sort of AI supercycle, you know, names like Google and Nvidia and Microsoft and some of the names obviously, that, that we own and have talked about before, some other things that, you know, I think is fairly interesting is on the, the gold and silver side that has a huge run up and it's pulled back and Bitcoin has pulled back.
And you're soon seeing some of these assets where people, you know, maybe thought that these were hedges for inflation. And they're they're pulling back, you know, lately, you know hard to know why. Looks like more of a technical move. Hard to say that the fundamentals have shifted that quickly. But gold was hitting all time highs and then has now recently pulled back on that.
So what else is happening in the market? So let's look at a couple of names. We're not going to do a deep dive on any of these names. But but when you look at Apple it recently announced its earnings. Apple had has done fairly well. Services are doing well. IPhone 17 has been a big hit and I think a bigger hit than people expected.
I think the news here around their partnership with Google and Gemini and that's going to be that sort of the brain for their AI moving forward. They didn't disclose the details of that. If you listen to the call, they didn't give the specifics and they not do not plan to. So we'll have to see what happened there.
But Google sorry, Google and Apple are teaming up here. So it'd be interesting to keep an eye on that. They're already they're already teamed up on the search side. So what that sort of default, is the Google search for Apple. And so we'll have to see how that plays out. So if you look at what's the how's Apple done year to date as a consequence.
You know not stellar down 0.73%. And if you look at the the one year number there, you know, year over year you're up 18%. So fairly good there. Obviously there was a lot of pressure and just a couple of stats. Where does that put Apple on the market cap side? Now that's just under $4 trillion.
3.96 trillion and the PE ratio of 34 times. And so, you know, people are concerned about that PE ratio and thinking that, you know, the valuation is not justified, especially given that Apple doesn't have this AI play in place and they're building this partnership with Google. And on the other side people say, well, they didn't spend all this money on AI.
And, you know, consequently, they're in a better position now to decide how to move forward from here. More on Apple on another episode. But that's where Apple is. Let's talk about another fan favorite here is Amazon. Again, these are just check-ins, not deep dives. But what's the what's the year to date on Amazon in the one year.
So the year to date on Amazon. It's actually done fairly well. Obviously it's not a long time here at the beginning of February here, but it's up 3.27% already this year. And I, and I do think if you're watching, and paying attention, and I've mentioned this before, that Amazon is in a very good position to help monetize a lot of its assets against AI.
If you think about companies that are positioned very well to figure out productivity gains, with AI, Amazon is positioned well across retail. And the robotics that they can deploy in the warehouses and obviously with AWS also. So I do think it's, you know, should be watching it, paying attention. If you're thinking about AI, where does that put it?
Market cap 2.55 trillion right now. With a PE 33 times. Certainly not a cheap stock, not super expensive, cheaper than Walmart by the way, which we, won't talk too much about. But Walmart is hitting $2 trillion market cap status here as well. So if you look at, excuse me, a couple of other companies that I want to talk about here, just touch on, let's go to Google.
Alphabet is the name, everybody generally knows it as Google, but what's the what's the year to date here on Google. So the year to date, up 9.9% already. So it's having a big year. And I think on the back of really Gemini three coming out, the, you know, towards the end of last year.
And if you look at what's the one year number, for that, they're up 71%. So that's pretty exceptional when you consider if you look at, the market cap for this company, $4.15 trillion market cap company to be up that much is very significant. And we'll talk more about Google in some other episodes. And we'll probably talk about it a lot.
But one of the things that is driving this is this Gemini three, I think, and if you're using any of the models and I use Gemini, Grok, ChatGPT, and Claude on a regular basis, I don't use Deep Seek that much, but I do have it. If you're using these models, you can see that sometimes they leapfrog one another.
But if you look at the difference between Gemini 2.5 and 3, there is very significant increase, especially for the work that I do around investment analysis and trying to get analysis done with the models. Gemini 2.5, at least the version that I was running, wouldn't really run the investment analysis for me. Certainly not not in the way that I wanted it to, but 3.0 is doing that and doing it well
I think as far as multimodal goes, I think it's excellent. And you certainly could do the images and everything in it's built in. If you have enterprise Google workplace place, it's very good, of integrating all those things. And so, you know, they're getting I think the bump from that people realizing then, you know, they're going to be formidable now.
And I think ChatGPT obviously has the early lead as far as you know, first out of the gate, with that type of setup, with the user interface and it really working well. Now, a couple of the other things that's helpful. For that is that, you know, sort of the inertia for people saying, well, I'm using ChatGPT.
So, we'll see what happens there. And of course, Claude is Anthropic, private company. OpenAI is private company as well. But, Google I think is is well positioned here, and I think we'll continue to do well. So, let's talk about, some other, another few companies. Microsoft. So Microsoft has been having a very challenging time here.
And so if you look at, what's the year to date number right now it is off. Microsoft is a big company. It is off 14.5%. It's trading around 413 today. But if you look at what's the market cap, it's a $3 trillion market cap, and it's off that much. That's fairly significant. Now, it recently announced earnings.
And people were expecting obviously more from them. I think part of the concern here is obviously the growth in the cloud business. And that's slowing. The acceleration of that has been slowing, has slowed and that's the Azure. And the other part is I think people at least, you know, again, not investment advice, insert opinion here, is that the market is seeming to think that Microsoft, while they had this, partnership or still have this partnership with OpenAI and possibly had a good lead, let's say, in the AI game with Copilot and the things that were built on top of that, have possibly now fallen behind it don't really have
a clear path forward that's there. So they're certainly tied into OpenAI, and figuring out how that's all going to play out moving forward. I do think that puts them in a, in a more difficult situation. And if you listen to, you know, the models that people are using for the most part, just like the ones that I mentioned before, I did not list Copilot.
I think copilot definitely falls way behind as far as the functionality, ease of use and all of these other metrics that I would use personally. And if you survey people in general, I think, you know, Copilot doesn't really make the list unless that's the only model you have possibly access to, then that's something different that becomes, you know, that's part of the enterprise.
But if you think about what models people prefer to use, given that they have access, you'll regularly hear, you know, ChatGPT, Gemini, Claude, Grok, you know, Copilot not in the mix. So we'll have to see how this plays out. But I think that, at least in my view, some of the concern here for Microsoft in their, in their AI strategy, seemingly having a really good progress, before, but kind of falling back a little bit.
All right. You know, probably every, every episode we need to talk about Nvidia. And so what's Nvidia been doing and, and how has it, you know, been holding up so that the challenge for Nvidia is, you know, people think okay, well they, you know, they they have been well positioned, but maybe they're just not as well-positioned as people had thought.
And, you know, one of the things that, has come out is obviously that, you know, people think, well, maybe there's just too much hype in, in this trade and maybe there's much to do. Maybe not about nothing, but just that there's too much in this. And so if you look at the year to date number, not down, substantially, but for a big company, it is 3.84%.
You're at 179 today on the share price. And where does that put the company? Still super large company, $4.39 trillion market cap and a PE of 44 times. And so, and the forward is even lower. So if you're looking at that, you're not saying, okay, this is a really expensive company, by any measure, with the type of growth you can expect in what's happening in AI.
And you would think that, okay, well, you know, maybe this will blow over, but I, I think you certainly have to watch this. And if you think about the stories that are happening here, we'll cover this in another episode. You know, are people really chipping away at their lead? We'll have to see how that that all goes. So I do think it's an interesting time to be watching.
I think another company that's worth mentioning here, and a company that we own is Berkshire Hathaway. So if you're thinking about Berkshire Hathaway, you know, Warren Buffett stepped down at the end of the year. And, you know, Greg Abel has taken over that company. So what have they done, year to date here?
So not not a big move here. Year to date. You're talking less than 2%, up 0.76% up. Okay. What are the stats on this company? This is very large company. One of the largest non-tech companies out there, $1 trillion market cap, about 16 times, on the earnings side. And I think the real key here, as an investor into this company is thinking about, well, what is the path forward for Berkshire Hathaway?
Is Greg Abel going to be able to do the same things Buffett did? Probably not. But can he be successful? He can be. And I think that's something to pay attention to and watch. I think that's super important, to, you know, as an investor to understand. Well, should we continue to hold the shares? We do for the Investment Institute, you know, again, not investment advice.
I do think in a way this is sort of the anti or the contra, I want to say anti is, you know, not fully against here contra, you know, I think is a better word for it, but it's sort of the opposite of the AI trade. And I think it's super important to be thinking about and paying attention to what's happening there.
You know, what's the path forward? Can they do, the same deals that Buffett had done? No. Can they do other deals? Yes. Do they have a lot of cash? Yes. Do they have a great set of assets? Yes. Could they break up, you know, the company in a certain way? They could. Could they start paying dividends?
Maybe, there's all sorts of things that could happen here, and we're not necessarily sure, obviously, from this point forward, what is going to happen? It continues to be, I think, under Greg Abel, a very well-run company, very disciplined company. I don't expect any of that to change. And so as a shareholder, I think, you know, some people, including us, are going to adopt the wait and see and pay attention and see what Greg Abel is going to do.
And also, again, you know, if you're concerned about the AI trade having too much hype in it, or any hype in it at all, this is a contra trade where you have some stability in your portfolio, and these things are going to keep grinding away. Burlington Northern Santa Fe, for example, you know, trains, you're going to keep getting a lot of the economy is doing well.
They're going to do well. And they don't necessarily, in the short term, you know, get beaten up too much by AI. Now, part of their, you know, set up that can have a big impact on the negative side from AI. And so this is not, you know, so this is where maybe AI is, you know, on the contra-side.
Is that the insurance business? And so if you think about, you know, what could be impacted in Berkshire, certainly railroads over a period of time might be, difficult to create the railroads just with AI, at least right now when the robots are out there running around. Possible. Maybe that's different, but for right now, what's what's more sensitive could be the insurance.
And so if you think about autonomous cars and you think about Geico and you think about the safety going way up, well, the cost and the price to pay the premiums that you have to pay are going to go down significantly. As a result, if things are much safer and, you know, to continue to make money at that price point, obviously that price point can can go down further if the safety is much higher and you have less accidents.
And so, good for people overall, safety wise. Very challenging for Geico as an example, as an insurance company. And so and other forms of insurance, if they get priced differently, if they get priced better, with the use of AI and then specifically on the car insurance, which is a big part, part of the business, for Berkshire and Geico specifically, you know, that's something to watch.
And so again, that is something that we have to pay clear attention to. So overall, obviously there's a lot more news out there. This is just a general episode. The market's off to again, a reasonably good start. You know, not super hot. Not super cold right now a fairly good month already. You're getting, a deal that just got announced with India on the trade deal.
So there's positive news there. You're getting the nomination done. Like to mention also, we own shares of PayPal. They have not really done well, they're changing out their CEO. So more to more to come about that. So we'll pay close attention to that. I think PayPal's very challenged, on the set up with, you know, competing against Apple Pay as an example.
We mentioned Apple earlier. And so I think we're off to a good start. Again, not investment advice for this year. I think it's, you know, important for us to pay then attention to how the companies are doing. I do think this is a year, you know, maybe you don't get the mass run up and all of the AI names, there could be some distinction this year.
So we're going to have to do our work. Pay attention. If you like watching the show, please subscribe. Thanks to everybody that does. We really appreciate it and we'll look forward to seeing you back on the next episode. Thank you.