We’re in a Danger Zone for Investors Over the Long-Term

Investment markets can be confusing. To try to cut through the chatter and investment slang, we present this monthly view to you. We want to give you a 50,000-foot view of market conditions updated as our view evolves.

Currently, our Investment Climate Indicator remains at Stormy. Stormy means that bear market rules apply, and we believe could be a period of wealth destruction.

Are the Machines Winning?

I have been in the investment business since 1986 and have been a Chief Investment Officer for over 20 years.  And I cannot recall a time in which the stock market was both this dangerous and fruitful at the same time. Yes, we’ve always had volatility (well, except maybe in 2017 when it took a “gap year” like kids do after high school).  But volatility today is different. It is driven in large part by value-insensitive market players that care far less about what they are buying than that they are buying it, or selling it, or both within minutes.

This is what the financial advisor of today and their clients must come to grips with. And it is a blessing and a curse. But more than anything, I think it creates confusion and overconfidence. Those two things are related because the investor and advisor conflate success in the stock market over a short, fixed period of time (a calendar year, a quarter, etc.) without considering that markets are, like life, inherently cyclical.

This is a great time to really hone in on one’s true objectives for their accumulated wealth, and make darn well sure that their approach to the 21^st Century realities of high-frequency trading, massive amounts of assets invested similarly (S&P 500, we’re talking to you!), and an economy that continues to take advantage of every opportunity to exploit what is left of the “easy money” central bank policies of the past decade. Put it all together, and it spells, again, a market that is fruitful…until it quickly turns dangerous.

December 2018 was a crash-test of sorts. I don’t know when the next one will be, but I do hope you saw that as a great time to take account of what you own, why you own it, and draw a straight line between that portfolio and your ultimate objectives for those assets.