2026 Belongs to the Prepared: Separating signal from noise is an essential survival skill

When considering what to write for my 2026 outlook – what helpful information I could impart – I realized that LMEs, litigation and market factors will all be covered in our Knowledge Series events for January with our guests Shan Qureshi and Jeanine Arnold, and much better than I could do alone.

A volatile macro environment, plagued by conflict and imperialist posturing, has already welcomed us to the new year. While the financial markets have seemed almost immune to macro events over the past years, this is by no means guaranteed.  

What is guaranteed, however, is that such events on the world stage generate noise that makes managing investments and advising clients that much more challenging.

Internal vs. External Noise

“Noise” can be internal or external – market events are external noise. It can’t be controlled, and unless someone has a crystal ball handy, it also cannot be predicted.

Internal noise, however, is under our control. It can be identified and managed. Whether a borrower might conduct an LME – this is external noise that cannot be predicted or controlled. The extent to which one is able to deduce the specific LME-potential of that individual borrower – whether one has the skills necessary to conduct the analysis of the docs – is within one’s control.  

Without these skills, it will be nye-on impossible to separate signal from noise. The noise in your own brain – “This is for the lawyers,” “I’ll call external counsel”, “I’ll re-read the covenant report” – will keep you from identifying the signal.

The Signal Exists Now

The signal is discernible – it’s written in the fine print of the finance contract. It is already there, waiting to be seen.

If the borrower and its advisors see it before lenders do, then the noise will shift: “We’ll join the coop,” “I’ll call my lawyer,” “I’ll get desk counsel involved”. Suddenly your day goes from analyzing credit or advising clients on market windows to worrying about what the legal documents say, trying to get an answer but struggling to understand it when it comes.

Managing Internal Noise = Better Decision-making

Fox Legal Training clients have the skills to separate signal from noise. When the borrower becomes stressed, they assess the LME potential in the docs. They might also call their counsel, but they do so from a vastly more prepared position than individuals without the legal skills to have a coherent conversation with lawyers.

If the borrower launches an LME, FLT clients are already thinking about how to amend terms to make them more lender-friendly on the other side of the negotiations. They are proactive, know what they want, and negotiate from a position of power and strength.

Why This Matters

If the markets do receive a jolt due to yet another invasion or government leader toppling, FLT clients look not only at the financials of their investments but also at the legal language in the contracts.

Everyone will be asking:

• What does the reports covenant say about information rights?  

• Are there default blockers and ratio conditions in place to prevent dividends during distress?

• How flexible are calculation mechanics and EBTIDA add-backs?

And the difference between FLT clients and market participants without legal analysis skills is that the former know where to look for the answers, and the latter will still be calling external counsel (along with everyone else), leaning hard on desk counsel (who are already overworked), and puzzling over covenant analysis reports (which are still written in legalese).

Turn down the volume on your internal noise: join us for our next Knowledge Series event with Shan Qureshi on 13 January at 4pm – click here to register.

To register for the following Knowledge Series event with Jeanine Arnold, click here.