November 2018
“THE REAL Long Term Risk in Equities is NOT OWNING THEM.” -Nick Murray, Simple Wealth, Inevitable Wealth, c 1999.
“If Sir John Templeton’s famous observation that bull markets “mature on optimism” and “end on euphoria” is accurate, we are barely at the optimistic stage. Maybe that’s a reason the current cycle already has lasted longer than anyone expected a decade ago.” -Financial Advisor Magazine, October, 2018, editor.
One cannot find much optimism in the news these days. But that is probably good. I have lived through periods during the past 40 years when optimism did reign – when people were advised to put everything into gold…then high tech stocks…and then real estate. And I have read about the great bubbles of past centuries where a tulip bulb became extremely valuable…for a while.
I can hear my mother recommending “common sense.” That does not seem to be a phrase currently popular. Common sense may be out of favor, but we think it controls advice we give clients.
There are too many variables affecting our lives and the stock market to suggest we can identify all of them…or even most of them, either positive or negative. Maybe… underlying the current market volatility… there is some factor/s so malignant…so serious… that the volatility should be taken as a warning, but it is usually an opportunity.
WHAT SEEMS IRRATIONAL:
- Concern that quarterly earnings are less than the previous quarter when they are good and double-digit.
- Expecting earnings results to be a little higher each quarter.
- Worrying about interest rates increasing when they are still below long-term averages.
- Ignoring the huge number of Americans who do not invest in the stock market and welcome the chance to earn higher interest on their savings.
- Worrying about the recent market decline without this context: between 1946 and 2013, the average annual intra-year decline in the S&P 500 has been about 14%. (Source: Capital Group). The current decline is about 9%.
- Assuming one knows the results of the Tariff banter. Did anyone notice the joint statement between the U.S. and European Union following the meeting between President Trump and the E.C.’s President Junker? On July 25, 2018, part of it read, “This is why we agreed today, first of all, to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods. We will also work to reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans.”
WHAT SEEMS RATIONAL:
- Concern over budget deficits and government and personal debt.
- Appreciation of our growing economy and high employment rate.
- Tax cuts, benefits and cost savings of deregulation, and normalization of interest rates.
- Wanting trade to be fair and free.
As always, we say “Hang on and add money if you can.” While I might wish I had invested more on the lowest “down” day, I have never regretted investing when the market is down.
We are only a phone call away!
Louise Googins, President, Author
Karl Kuelthau, Principal, Advisor
Michael Googins, Administrator
Kim Rankin, Accountant
Carson Bieber, University Business Intern
Logan Donovan, University Business Intern