July 19, 2019

Investors Shouldn't Sweat the Market

“In the Financial Analysts Journal over 40 years ago, Charley Ellis of Greenwich Associates famously characterized money management as akin to a game of amateur tennis in which success is not due as much to how many points one wins with great shots, but how one avoids losing points by making bad shots. Even at the professional level, unforced errors are the bane of the tennis player. Adherents of passive investing avoid playing the losing game by minimizing fees and trading costs.

To a large extent, politics is also a losing game. Donald Trump and his senior administration officials continue to undermine his own presidency with a series of unforced errors occurring at a pace greater than his grammatical errors in his daily tweet storms. The time worn finance adage is that the market “hates uncertainty” and while it is difficult to catalogue all of the missteps of the administration, from the partial government shutdown to the resignation of Defense Secretary James Mattis, and the trade war with China to spats with the Federal Reserve, and Treasury Secretary Steven Mnuchin calling bank executives in an effort to reassure the market that there is no liquidity crisis, the list expands on a daily basis.

The market experience in recent weeks reminded investors of the movie “Groundhog Day” in which a weatherman played by Bill Murray finds himself living the same day over and over again. The market opens flat, there is an morning to afternoon rally, and then a rash of selling sends the indexes lower at the close. Lather, rinse, repeat. The nearly 3 percent selloff in the Dow Jones Industrial Average on Monday in a shortened session led to many conversations about the market around holiday dinner tables. Is a recession on the horizon? Is it time to sell stocks? The market bounced back on Wednesday, with the Dow Jones Industrial Average surging almost 5 percent, in yet another whipsaw.”

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