Let me know if any of these sound familiar to you:
2013 Analyst: “We are deeply concerned about the sharply rising 10-Year Treasury Yield as a headwind for shares. The end of quantitative easing and the Federal Reserve’s unprecedented monetary policies may forestall further gains in equities.” Total return of SPDR S&P 500 ETF (SPY): +32.31%
2014 Analyst: “A sharp drop in virtually all commodity prices may be signalling a contraction in the global economy and warrant reducing exposure to risk assets. Furthermore, the strongest performing asset class is the 30-year Treasury bond, which is a virtual assurance of the coming apocalypse.” SPY total return: +13.46%
2015 Analyst: “We are worried that market breadth is deteriorating so rapidly. The “FANG” shares are the only bright spots in an otherwise bleak investing landscape. In fact, the average publicly traded company is now firmly in bear market territory.” SPY total return: +1.23%
2016 Analyst: “There are a number of issues moving our market currently, some of which give us cause for concern & hence we are taking a more defensive stance in 2016. We are in unchartered waters”: SPY total return: TBD
Should be interesting to see how that last one ends.
Those aren’t all real headlines, but very-close approximations based on very real themes that have assaulted investors over the last four years. I could go further back in time to sensationalise the concerns of market participants in the cross hairs of any given moment, but I think the point has been made.
The share market never looks perfect. There is always something to worry about.
If you are waiting on a specific point of certainty in order to invest, you could be waiting a very long time. Currently, it’s oil and China. A year ago it was the Euro Zone. There are always going to be wars, elections, corruption, debt cycles, share upheaval, commodity insecurity, and a whole lot of people who are bigger, faster, and smarter than you are in the market. In addition, there are shifting cross currents that offer little in the way of predictable patterns.
For example, right now the stock market is entirely fixated with the day to day fluctuation in oil prices. Shares want a rebound in oil to boost the sickly energy sector, prop up the credit markets, and generally re-initiate a sense of inflation or consumption in the global economy.
Years ago, oil prices were a thorn in the side of shares. If you saw a 5% jump in overnight crude oil futures, you could pretty much count on a big drop in the share market. Funny how perceptions change over time and “rules of thumb” seem to disintegrate under differing global circumstances.
This all goes to prove a point.
There is no certainty when it comes to investing.
There is only process and discipline to guide you through the difficult periods. Much of that discipline may involve tuning out the noise of the media that is constantly focusing on short-term themes or sensationalist headlines. They aren’t intentionally trying to hurt or persuade investors down any particular path. They are just motivated by different forces than we are.
There are going to be periods of turbulence that test the resolve of even the most stoic of investors. So it's imperative that you lean even further on your specific philosophy during those tumultuous times to achieve the outcome you want.
For me, the key is to recognise the things you can’t control – the markets’ daily ups and downs and the daily noise from the media – and focus on the things you can:
I speak daily with investors who have been chasing their tails with individual shares or sectors and trying to divine the next big trend. However, in my opinion this type of environment is more conducive than ever to avoiding those hit-or-miss propositions by committing to broadly diversified and low-cost index funds or ETF’s.
It’s not sexy, but it is a big stress reducer overall and will likely keep you from making those emotional decisions at inopportune times.
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