Skeptical Investing

By: Matt Garrott

The S&P 500 is up over 20% through September 30th.  Real estate is up almost 28%.  Even the Barclays Aggregate Bond Index is up over 8%.  Unemployment is incredibly low at 3.7% and wage growth is picking up.  Inflation is tame at under 2%.  The United States, particularly relative to the rest of the world, is doing well.  So why is there so much bad news in the media?

Short-term uncertainties dominate today’s news cycle.  These short-term fears are contagious and political.  Trade war, Brexit, US elections, and the Middle East defy simple explanation.  Even as it brushes new all-time highs, the stock market has only gained about 7% over the last 20 months.  Should we be skeptical of the markets going forward?

This is normally where we say to ignore the noise and remove emotion from the equation.  We are all emotional beings, though.  Skepticism is essential to investors as long as it doesn’t slide into cynicism.  It is a fine time (especially while near S&P all-time highs) to revisit financial plans and risk tolerance.  Has your financial situation changed?  Does it make sense to deleverage your personal balance sheet?

As for today’s headlines, emotionally-charged news can and will move markets in the short-term.  It is human nature to view these items from a worst-case scenario perspective.  However, cynicism as an investment strategy requires predicting not only market movements, but the timing and reversal of such moves.  This is an impossible task.  It creates the illusion of control while bleeding the portfolio dry.  Sometimes the best investment strategy is for investors to get out of their own way.  There’s no need to add complexity to an already difficult endeavor.  Over the long-term, it is optimism that is grounded in reality and that should drive portfolio construction.

Fairway Scorecard 9-30-2019