GrandpaLand is a swing, trampoline, hammock, and a teetertotter in the shaded corner of our back yard. On Thursdays, the “littles,” as we call the grandkids under seven, spend the day with Grandma, while their respective parents get some work done. GrandpaLand provides welcome relief as the kids run and play.
Three of the littles are about the same size and work the teetertotter both up and down, and since its hinge sits atop a pivoting base, round-and-round, like a merry-go-round.
Does the past year of market movement feel a lot like a seesaw to you? It does to me. There’s some encouraging news, and we go up for a few weeks. Then we hear about something bad, and we come back down. We never move very far in either direction, just like that toy in my backyard, restrained by the ground on one end and the heights on the other.
We call this situation a sideways or a range-bound market. In response to the FED changing from accommodative to tightening, the market hit its low on October 12 last year and we’ve not come within 10% of the all-time high since then.
It’s during times like these that perspective matters. Prudent investors keep their focus on things that matter in the long run and try to ignore the short-term stuff, like weekly jobs reports, congressional testimony, or rising mortgage rates, which help the banking industry, recent bank failures notwithstanding.
Now would be a good time to explain something that plagues most people. It’s a trait that impacts the way we all tend to react to changes. Thoughtful people, those who take a breath, a moment to think before acting, are able to overcome this disorder, but it takes some effort. The malady is called “recency bias,” and it is the tendency to think that recent events are likely to continue indefinitely into the future.
And our society, with instant feedback available on the apps in our hands, stoked by niche-market news channels, reinforces the bias.
As an example, within hours of a venture capital bank failure, the rumormongers predicted a global bank run. They blamed the bank’s problems on rising interest rates while failing to acknowledge that rising interest rates are generally good for the banking industry, and not-so-good for tech companies.
In the process, they create a “wall of worry,” which keeps their overinformed audience focused on short-term issues to the detriment of their long-run objectives.
The funny thing about a wall of worry is that markets can sneak up on us during these times. LPL Financial’s technical analyst, Adam Turnquist, informs me that since the October lows, the successive interim market lows are hitting at higher levels.
I’ve got a notion to build a climbing wall in the backyard, keeping GrandpaLand relevant as the kids age out of the teetertotter.
Likewise, during times when the markets are climbing the “wall of worry,” it’s good to stick with a long-run focus, maintaining a well-diversified portfolio matched to your risk and time horizon profile.
So be like the grandkids, enjoying life, knowing that we’re monitoring the situation, making strategic adjustments, and keeping you informed as we navigate through yet another confusing time.
As always, reach out with any questions, and we look forward to our next round of client checkup meetings this Spring.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted, and there can be no guarantee that the strategies promoted will be successful.
The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
TRACKING # 419219-1