Our 250 Cents
Michael Leist
One of the most destructive investing temptations is that of market timing. To commemorate our 250th edition of Strategic Insights, we take a step back to remind investors that investing is a long-term disciplined process.
This week marks the 250th edition of our weekly commentary, Strategic Insights. For 270 connective weeks, our Strategic editorial team has published 250 editions of Insights along with 20 editions of our Quarterly piece, Strategic Perspectives.
To mark this milestone, we take a step back and steal a page from the world of television and the art of the “clip show.”
Clip Show?
If you are not familiar with the term, this is where a television series breaks from its usual format and uses clips from previous episodes presented as a flashback.
A big thank you to all our loyal subscribers. 98 individuals received the first edition in 2012. Today that number is closing in on 1,000. We hope you continue to find the updates timely and informative. Your feedback, suggestions, and questions are always appreciated, please keep them coming.
Lessons From the Past
Contributed by Doug Walters
One lesson we have reiterated numerous times in Insights is the dangerous temptation to try and time the market. In fact, a search through the past two years of Insights, shows we have discussed market timing in at least six editions. This is a crucial concept for investors to understand, especially where we currently sit, with equity valuations elevated. At times like this, it is typical to see clients ask for changes in asset allocation, with big reductions in equities. However, as we featured on two occasions in 2016 (referenced below), market timing is not investing, rather it is a fool’s game. Those who partake either get lucky or get burned.
September 2016 | Volume 5, Edition 36
December 2016 | Year in Review
While we have confidence that equity valuations are above average, we have no crystal ball, and stocks are just as likely to rally another 50% on improvements in the economy and corporate-friendly policies as they are to experience a significant negative correction.
Investing is not about predicting the future. Rather, it is about preparing for it through a robust and repeatable security selection process, prudent diversification, and regular rebalancing.
A Case Study on Preparation
Last year provided a powerful example of this approach. In early 2016, U.S. equities fell over 13% in a relatively short period. We witnessed a temptation for many investors to run for the hills, abandoning their equity holdings and inspiring us to publish an edition of Insights titled:
February 2016 | Volume 5, Edition 6
In the report, we advocated for investors to be increasing, not decreasing their equity holdings. Since then, the S&P 500 is up about 30%.
The point is not that we correctly predicted the subsequent rise. Stocks could just as easily have fallen further. However, we knew that incrementally, stocks were better valued than they had been just a few weeks prior, and by sticking to our process, we were compelled to rebalance some funds into those equities that had fallen.
Stocks will go up and down, and sometimes dramatically. Trying to predict the exact inflection points has historically proven to be a major source of investor underperformance.
Catch the Reruns in Syndication
A reminder that you can create your own “clip show” at will. The past two years of Insights are available in our “Resource Hub”.
Also, within the Resource Hub, you can search through the archives for particular topics and themes with our filters and text search.
For example, we ran our own search to find the most popular topics over the last two years. No surprise that President Trump garnered the most attention:
April 17 - 21 Market Recap
Contributed by Max Berkovich
- The Early part of the week was characterized by low trading volume with reports on earnings dictating the direction of individual stocks.
- Notably poor trading results from Goldman Sachs (GS) and another quarter of declining year over year revenue from IBM Corp. (IBM) set a negative tone.
- On Thursday, Treasury Secretary Mnuchin changed market sentiment by announcing that major tax reform is closer to moving forward and will proceed with or without health care settled.
- The statement from Secretary Mnuchin ignited the market.
- The President followed up by promising a “massive” tax cut plan next week.
- Elections in France and anticipation of the “massive” tax plan will take center stage next week despite a busy corporate earnings calendar.
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