How to Navigate Financial Decision Making in the Absence of Facts

Using history as a practical guide

There is a TON of research coming out of the big shops on Wall Street – Goldman, JP Morgan, Credit Suisse, Merrill, Morgan Stanley…It’s written by smart, impressive people. I read some of it.  I like it, but most of it is irrelevant to me.

“How,” you may ask, “could such sophisticated research coming out of the big shops from the brightest minds be irrelevant to you?”

Because I’m not the real audience.

And neither are you.

That stuff is written for the big institutions, traders, and their peers.  It doesn’t mean I dismiss it. I’m just saying the average investor is not the audience.

While Monument is no longer affiliated with LPL Financial, I still hold their whole team in the highest regard – across the board, but specifically their research group.

They write real stuff for real people – data-driven and thorough, it uses history as a guide. It’s uncomplicated and elegant in its simplicity.  That’s why I routinely refer to them and Bespoke Investment Group in my blogging.

So, with that, I offer the following – we’ve had a monster run off the stock market low and the market posted a 15-day gain of 22%…

Which was the biggest market gain over a three week trading period in history.

This chart from LPL shows the data. (Twitter: @lplresearch and @RyanDetrick)

I’ve always referred to “odds,” “data,” “probabilities,” and “time” when it comes to having the proper perspective on investing over the long-term…and maybe the inconsistency of terminology blurs my messaging on what I’m really getting at.

What I’m REALLY getting at is using history as a practical guide.



Not a definitive/ultimate/absolute/perfect/complete guide…but a PRACTICAL GUIDE.

Because in the world of unknowns, like now, practical is about the best you can do.

The chart is an example of using history as a practical guide. Looking back into history, you will see that 100% of the ten previous “Best 15-Day Returns Ever” periods are positive after 12 months with an average return of ~22%.

In fact, the 1, 3, 6, and 12-month returns are positive 40%, 60% 90% and 100% of the time, respectively.

That shows how time helps, and its an example of a PRACTICAL GUIDE.

I know this conjures up a lot of “ifs” and “buts” BUT, if “ifs” and “buts” were candy and nuts, life may indeed be a fruit cake (or something else), but the data and historical context are there to be a useful guide for long-term investors making the hard decision to remain optimistic.

And I’m optimistic about the future. I don’t know what will happen over the short-term, but I know this…

The Fed just injected three phases of stimulus that’s the equivalent of 11% of GDP.  That’s a lot and the 4th phase getting voted on tomorrow is not even counted in that 11%.

This first appeared here: How to navigate decision making in the absence of facts

Related: Why It’s Not About Finding the Market Bottom