One of my biggest pet peeves is the notion that markets will some day have “certainty.” I’d argue that “I’m waiting for clarity before making a decision” is actually the worst thing someone can say if they work/invest in the stock market. Awful, embarrassing to hear, people pay advisors and analysts to make tough decisions when things seem crazy because that’s the whole point. You will never have clarity, things will never settle down, uncertainty is and always will be present because if it wasn’t stocks would never move. As we end the month of September I want you to remember one thing about our current level of uncertainty: this market is 1st, 2nd, and last about global trade and monetary policy. It is not about politics or anything else, it’s about how the interconnected economies of the world are responding to a spat between two gigantic trading partners. If you’re a fan of watching intraday price action like I am you’ll notice that headlines regarding trade are still leading the market around by its nose. When that changes I’ll let you know, but until then don’t confuse noisy headlines with what investors really cares about.
So what do smart investors really care about other than trying to figure out how to get to this beach? They care about the fact that the U.S. economy continues to muddle thru driven by a consumer that remains somewhat resilient. Is manufacturing and business/CEO confidence weak? Absolutely, but what else would you expect from a global Trade War? The biggest risk remains some kind of policy error (Trade War spirals out of control, Fed doesn’t act, etc) that finally cracks that resiliency. That being said, the consumer is still consuming, they are still buying New Homes, they still have jobs, and their balance sheets are quite good. Recall that 70% of our economy is driven by YOU (sorry to my pals reading this abroad) so that’s what we’re watching for signs of weakness. Can anyone predict a recession by just watching consumer data? Of course not, no one can predict anything at all, but why do you think the market has remained so steadfast (I love that word) in the face of all this horrendous economic data? Also why are Pumpkin Spice Lattes so popular? They’re awful.
Lemme say one last thing about politics (how many people have ended their career saying that?). Politics is extremely noisy with almost no signal. The market cares about POLICIES not politics, that’s what we want to be thinking about. Remember the rally in 2017/2018? Happened on the back of de-regulation and a tax cut which boosted corporate earnings. To the extent that we might see fewer market friendly policies in the future that MIGHT have an impact on the investing landscape. MIGHT. Again, nothing is certain (other than October being the best month of the year), but that’s what stocks focus on. Look, I know it’s challenging to divorce your political views from your market forecasts but you absolutely must do so because strongly held beliefs can be toxic to investment returns. These are big complex entities we deal in, don’t make the mistake of over emphasizing the wrong things, headline related volatility and uncertainty will always be a part of this world.
- Short Investing Beliefs by Morgan Housel. I loved this: “History > forecasts, because most investing history is how people reacted to forecasts and things that weren’t forecasted”
- Market returns can be crazy and inconsistent: “Sometimes returns are front-loaded, sometimes they’re back-loaded and sometimes they’re not great, even over longer time frames. The past 10 years or so have been great for anyone invested in U.S. stocks. The previous decade was crap. The two decades before that were unbelievable. The decade before that was not fun. I could continue. One period of inconsistent or poor returns isn’t a reason to give up on the stock market. That’s how it works”.
- How did I not think of this? A self-driving garbage can? Sign me up
- Blair has it right here: “Fear is a necessary part of long-term investing, unfortunately. If there were no reasons to be fearful, there would be no opportunity to earn the market risk premium”
- Sweaty palms just thinking about this
- Now that’s a living room…
- Don’t confuse activity with achievement. Harsh but fair words here…
- Don’t confuse Kraft Mac n Cheese with this Mac N Cheese. This one is LEGIT
Oh man I love this video so much, there’s nothing better than seeing the joy of youth. It makes me laugh and smile at the same time, make sure you have sound!! (the kid on the 50 cracks me up)
Have a good night