By Frank Holmes, CEO and Chief Investments Officer for U.S. Global Funds
“Follow the trend lines, not the headlines.”
The quote, attributed to former President Bill Clinton, is one of my favorite pieces of advice. Clinton was referring to long-term data that show that conditions have actually been improving for the human race despite popular opinion to the contrary. When applied to investing, it cautions against missing opportunities because you’re too busy reacting to negative news.
To be sure, there’s more than enough negative news right now: international trade tensions, volatility in Syria, Brexit, an impeachment inquiry and much more.
As I’ve said before, I happen to be a news junkie. The U.S. Global Investors office has a number of TVs, all of them tuned to financial news networks. I constantly urge everyone on our team to stay informed and raise their awareness of what’s happening around the world and in their communities.
But this alone doesn’t guide our investment decisions. If we based everything on what the talking heads tell us, we may never have the confidence to invest so much as a dime.
Instead, we focus on fundamentals such as moving averages and standard deviation. We follow leading indicators such as the purchasing manager’s index (PMI) and consumer confidence index. These factors are many times more effective than the headline news at shining a light on the right path.
Mike Matousek, head trader at U.S. Global, has a colorful saying that complements this idea: “It doesn’t matter if they make jelly beans or trash can lids, if a stock’s going up, you want to own it.” And conversely: “If it’s going down, you don’t want to own it.”
Did You Catch These Opportunities?
Let me give you some real-world examples of what I’m talking about. A lot of the news coming out of China right now is negative. Its economy is slowing. Tariffs are hurting trade. The Hong Kong protests are causing geopolitical pressure. It’s enough to make an investor run and hide.
Which would be a mistake. Take a look at the chart below. The First Trust Chindia ETF, which invests in companies in both China and India, is up more than 20 percent for the 12-month period through October 25. That’s enough to beat the S&P 500 over the same period.