Upticks: How We Pick Stocks—Falcon’s CIO on AI, Earnings, and Market Risks
By Luke Sullivan on October 21, 2026
Financial markets generate a constant stream of information. Corporate earnings, Federal Reserve decisions, elections, geopolitical developments, and emerging technologies can all influence investor expectations. With so many factors competing for attention, it can be difficult to distinguish meaningful information from short-term noise.
In this week’s episode of Upticks, Jake Falcon sits down with Falcon Wealth Advisors’ Chief Investment Officer, Conner Hanlon, CFA®, to discuss current market conditions and explain how our investment team evaluates individual companies.
Their conversation highlights an important distinction: developing an investment strategy involves more than predicting which stock or sector will perform well next. It requires understanding the underlying business, evaluating its financial condition, and determining how the investment fits into the broader portfolio.
Corporate earnings provide important information
Conner identifies corporate earnings as a meaningful contributor to market performance during 2026. Earnings reports help investors understand whether companies are generating revenue, controlling expenses, and improving profitability.
Quarterly results can also reveal changes in demand, pricing, operating costs, and management expectations. However, one earnings announcement rarely tells the complete story.
A company may exceed analysts’ expectations because business conditions improved, because expectations were conservative, or because of factors that may not repeat. Investors therefore need to evaluate the results in context rather than treating an earnings surprise as a reason to immediately buy or sell.
Conner explains that Falcon’s investment team generally evaluates companies over a longer time horizon. The objective is not to predict the next quarterly announcement but to assess whether a business may remain financially attractive over several years.
Interest rates affect more than borrowing costs
Higher interest rates influence both households and businesses. They can increase borrowing costs, change the relative appeal of bonds, and affect how investors value future corporate earnings.
Conner explains that companies with substantial debt may face pressure when existing obligations mature and must be refinanced at higher rates. The cost of that financing can affect future profitability and cash flow.
Interest rates also influence valuations. When investors use a higher discount rate to estimate the present value of future earnings, those future cash flows become less valuable in today’s dollars. This can be particularly relevant for companies whose valuations depend heavily on earnings expected many years from now.
The episode also discusses the 10-year Treasury yield and how changing bond yields affect existing fixed-rate securities. A bond purchased when market yields were lower may decline in market value when newly issued bonds offer higher yields.
A laddered bond portfolio can help organize maturities across different years, potentially providing recurring opportunities to reinvest proceeds as securities mature. It does not eliminate credit risk, interest-rate risk, or other investment risks.
AI offers opportunity, but not every company will benefit equally
Artificial intelligence is another important theme in the discussion.
Conner and Jake recognize AI’s potential to improve productivity across industries. However, they also question whether every company investing heavily in AI infrastructure will ultimately generate sufficient returns to justify the expense.
Data centers require significant capital, including equipment, facilities, energy, and financing. Companies relying heavily on borrowed money may face additional pressure when interest rates rise.
The investment opportunity therefore extends beyond identifying businesses associated with AI. Investors must consider how much capital a company is spending, when that spending may produce revenue, and whether the expected return adequately compensates for the risk.
Conner also notes that productivity improvements may benefit companies outside the technology sector. Businesses in manufacturing, services, and other industries could potentially use AI to improve operations and profitability.
That possibility does not guarantee investment success. It reinforces the importance of evaluating individual businesses rather than assuming every company associated with a popular technology will benefit equally.
How Falcon evaluates individual companies
One of the most useful portions of the episode is Conner’s explanation of the investment team’s research process.
Before evaluating a potential stock in isolation, the team considers where it would fit within the existing portfolio. That includes exposure to different company sizes, sectors, geographic markets, and investment styles.
A company may have appealing characteristics but still increase concentration in an area where the portfolio already has significant exposure.
The team then examines business fundamentals, including revenue and earnings growth, operating margins, debt levels, and management experience. For companies that regularly make acquisitions, the team may also review how successfully those acquisitions have been integrated.
This process helps connect an individual investment decision with the larger portfolio. The question is not simply whether a company appears attractive, but whether its financial characteristics, risks, and potential contribution are appropriate within the broader investment strategy.
Fundamental research cannot eliminate uncertainty or guarantee that an investment will perform as expected. Even a company with strong financial results may experience declining stock prices if expectations change, valuations become less favorable, or business conditions deteriorate.
Diversification requires understanding underlying exposure
Jake and Conner also discuss concentration within major market indexes, particularly exposure associated with large technology companies and the AI investment theme.
An index may hold hundreds of securities while still having meaningful exposure to a relatively small group of companies or related economic factors. The number of holdings alone does not fully describe diversification.
That does not make index investing inherently inappropriate. Broad index funds can provide diversified exposure at relatively low cost. However, investors should understand how an index is constructed, which companies have the greatest influence on its performance, and whether it complements their other holdings.
The same principle applies to portfolios of individual stocks. Owning several companies does not necessarily provide meaningful diversification if their financial performance depends on similar conditions.
Planning for an unpredictable market
The episode concludes with Conner’s outlook for 2027, including the possibility that AI-related productivity improvements could support corporate earnings across multiple industries.
That outlook is an opinion rather than a prediction of guaranteed results.
Markets will continue to respond to changing economic conditions, corporate earnings, monetary policy, and investor expectations. No investment team can know precisely how those factors will develop.
The value of a disciplined research process is not that it eliminates uncertainty. It provides a framework for evaluating opportunities, understanding risks, and making decisions consistent with the financial plan.
For investors, the lasting question is not simply which company may perform well next. It is whether they understand what they own, why they own it, and how each investment contributes to the portfolio’s purpose.
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