“When you put a fire under a pot, you learn what’s in it.” — Malcolm X
If a deadly pandemic overtakes the world, but the market looks past it, did the pandemic really happen?
The equity markets staged a dramatic rebound during the quarter as local economies opened across the country. The question for investors is, how can the market turn so positive when data points to rough months ahead?
The short answer is “because the market is forward looking.” Investors are peering many months into the future to a point when Covid-19 fades away, the population gains herd immunity, or researchers find an appropriate treatment or cure. Investors are looking past current data towards a recovery.
Should the Market be so confident?
Read More “The Market Looks Forward”
“Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold.” – Warren Buffett
From an investor’s perspective, 2018 was a challenging year that began with a strong first half, only to encounter a sharp reversal and decline. Looking back to the start of 2018, if we had known that we would end the year with no major military conflicts, a major tax cut, a revised trade deal with Canada and Mexico, 20%+ corporate earnings growth and unemployment at 3.7%, any rational investor would have predicted a strong market for 2018. The reality is that with the Republicans winning the White House in 2016 while already holding a majority of votes in The House and The Senate, the market expected legislation favorable to businesses and lower taxes. Expectations drove the market gains we saw throughout 2016 and 2017. The volatility we are seeing now….is based on investor expectations (and fears) for the year ahead.
Read More “The Market Abhors Uncertainty”
“Volatility scares enough people out of the market to generate superior returns for those who stay in.”
– Jeremy Siegel, Professor of Finance at The Wharton School
The year has started with volatility that we haven’t seen in the last two years, and it continues as I write this letter. There are two primary narratives driving current markets:
- A possible China/global trade war and,
- A broader technology stock selloff due to backlash over privacy/data lapses, and concerns over government regulation of the largest tech companies.
I will spend some time discussing both topics.
Read More “Tariffs and Taxes and Data, Oh My!”