December 2025 Update
We’re just a few weeks away from Christmas and the end of the year, which has been a positive year for investors in the major indices. The Orion Fund has followed suit, and we have had another positive year and (barring something catastrophic over the next few weeks), will finish well into the double digits. This might not have been what was expected earlier this year, but investing is somewhat mysterious. Following the drop in April, the markets recovered nicely through September, and in the last 8-10 weeks, we have seen some volatility again. I’m pleased with how our holdings have weathered this turmoil, and we’ve come through that in good shape. November marked the 7th consecutive month in which the fund had a positive return.
At this point in the year, people start to look ahead to 2026, and sometimes I get asked what kind of return I think we can get next year. I can’t make those kinds of predictions, and really, it’s just futile! The financial markets and the economy are more volatile than people realise. For example, while the longer-term average return on the market is around the 10% mark, the market nearly never has a return for the year between 8% and 12%. In other words, we have years with significantly higher returns and years with returns that are substantially lower. I can’t predict what will happen in 2026 with any accuracy, and honestly, no one else can either. If you put a gun to my head, I would tell you that we will likely have a positive year next year, and somewhere in there, we’ll see a pullback of around 13-15%.
One thing I am continually asked about is whether we’re on the verge of a crash. This is a topic that is frequently discussed in the media, particularly on social media, and I know it is on many people's minds. Let me say that at this point, I don’t see it. I think that the markets are in decent shape at this point, and while some sectors are overvalued, I don’t see specific signs that we’re about to see carnage. I will say that I monitor this closely and reserve the right to change my mind, but that is where we are today. When it comes to investing, I like to operate with the idea that I have strong opinions, but they are loosely held. You can rest assured that if I change my mind and it becomes apparent that we are going to experience a crash or similar event, I will take action.
At this point, I would like to discuss AI and whether it is a bubble that is about to burst. This is where things are so tricky. First, I believe that several companies in that space are overvalued. At this point, AI has been the primary driver of returns on the S&P 500 over the past year or so, and some of those valuations are too high for me to consider investing. Some of you might wonder about taking short positions or using options to not only avoid the crash when it comes, but also make a pile of money. That is not only outside the fund's purview, but for several reasons, it is a bad idea. The issue with this strategy is that your timeline is dictated to you. The reality is that, even though I think some companies are overvalued, it doesn’t mean they will fall immediately, and the timing of their reversion to the mean is unknown. These companies could continue to rise for months or years, and we have no way of knowing. As Keynes once noted, “The market can stay irrational a lot longer than you can stay solvent”. Instead of trying to take that kind of position and be the main character in “The Big Short II”, we’re better off sticking to the pragmatic and prudent approach.
Finally, I would like to say that I am expecting a positive conclusion to 2025. Despite all of the trials and tribulations in the market, things have turned out really well, and we have no reason to expect that to change imminently. I also want to thank you all for your support and confidence this year! I really appreciate it when things are complicated, and we’re facing never-before-seen challenges and obstacles; our clients are always so supportive and wonderful! It really does mean a lot, so thank you for that. I hope you have a fantastic holiday season and a prosperous and healthy 2026!
Vic
