“Everyone has a plan until they get punched in the mouth.” -Mike Tyson
While we are bullish in the short term, we remain cognizant of where we are in the cycle and are preparing ourselves for what a down market may bring. Having a plan in place beforehand helps control emotions and ultimately leads to better investment decisions. In this latest newsletter, we’ve taken a look back at this past quarter, some of the things that are causing the choppiness in the market: tariff talks and rising interest rates, and how we are preparing for a more volatile market environment.
Successful investing is often determined by one’s ability to stay the course. Since 2009, investors have had every excuse to bail out of stocks, but the market has continued to climb a wall of worry, becoming one of the longest bull markets in history. In fact, since March of ’09, the S&P 500 is up 290%. By historic measures, this market has lasted 108 months vs 54 months for the average bull market. The question becomes: Where are we now? In our humble opinion, we are probably pretty deep into the 4th quarter and might go into overtime.
Despite the lingering uncertainty and questions related to global policy: Legislative, Monetary (the Fed) and Foreign, the market has continued to grind higher, further strengthening the argument that despite the negative and uneasy sentiment, markets and global economies are actually quite healthy. For the first time in a while we are seeing global economies growing in sync (See Chart) and this backdrop has provided healthy returns for just about every stock market around the world in 2017.
The first half of the year delivered superior returns for the US Stock Market as measured by the S&P 500 (+9.3%), but as we entered into the doldrums of Summer, that torrid pace slowed down considerably. June was a relatively flat month and the first few weeks of July have looked similar. While a strong first half typically follows with a strong second half (See Chart), a summer pullback or continued consolidation would be healthy. That said, as we look to the chart once again, the trend is our friend and as we’ve learned throughout the years, you don’t fight it.
As John Maynard Keynes so eloquently put in his book “The General Theory of Employment, Interest and Money” nearly 80 years ago, investing is about the long term. If we just thought of investing like so many other long term focuses in our lives, we would all no doubt be better at it. Our job as wealth managers, not investment managers, is to make sure that our clients continue to take a longer term view and keep the “contemporary evils” from getting in the way of sound advice. Despite our long term focus, as investment managers in addition to wealth managers, we must also keep an eye on the near term to either protect against a downturn or seize opportunities in the ever-changing market environment. While long term we see troubling issues facing global markets and economies, there may be some near term opportunities which we will address.
Overall, market fundamentals are in good but not great shape. Worldwide economies are slowing and uncertainty continues to dominate headlines, but it’s not a reason to head for the hills. In addition, with a backdrop of continued low interest rates (either next to nothing or negative), equities continue to be the only game in town. So while there is a lot to be worried about, the thing that is most in favor of rising stock prices is the fact that in public markets worldwide, There Is No Alternative (TINA) to invest in.
