Today’s market climate is unmatched in our history. Here’s a guide.
“There’s no time like the present” is an old phrase meant to encourage someone to get something done now, and not procrastinate. When it comes to investment markets, that statement rings true today. However, the other meaning of that phrase to today’s investor is this: there has never been an investment era like this one. Ever. That means you need to evolve your approach to EVERYTHING regarding financial markets. EVERYTHING. Some examples:
Algorithmic investment techniques, so popular today, all have potential tripwires attached to them. Why? Because they are based on what happened in the past, and the expectation that it will repeat itself in the present and future. Don’t get caught in that trap.
- “Past performance is no indication of future returns.” It’s on every fund and investment advisory advertisement. It’s about time investors started believing it. For instance, if you relied on how an investment strategy did in 2020 and 2021, you are probably wondering what happened to your money recently. Even more so, if you came to believe that stocks like Facebook and Netflix were “one-decision” stocks – buy them, and never have to consider selling them, because they don’t ever drop much. Look at those charts. Those are not stock splits, those are mammoth declines in value.
- There is so much more about what influences investment markets today that was not a factor years ago. But when the Federal Reserve and other central banks opened the monetary spigot, and opened it especially wide in 2016, they created a vicious cycle that can only end badly for many unsuspecting investors. You just can’t make money that cheap for that long. It produces the hazardous effect of convincing spenders they were, as the expression goes, “placed on 3rd base and acting like they just hit a triple.” Case in point, consumer credit is spiking again. Say no more, the leverage genie is out of the bottle again.
As I have noted in a consistent set of social media posts this year (on LinkedIn and Twitter, primarily), the S&P 500 is in a decided downtrend, and one that is proving very difficult to break. If it does, great. But if it continues to slide, investors are going to have to do more than just “hide in cash.” They will need to expand their investment universe and technique and learn to capitalize on these most unique times. It’s do-able, but only if you open your eyes to what’s going on around your money. Because there’s no time like the present, and that means one thing: don’t procrastinate.