One month into the New Year and one of our core investment beliefs was confirmed: Nobody can predict the markets. The Bloomberg US Aggregate Bond Index gained 3.1% and the S&P 500 rose 6.3%. The NASDAQ, which lost 32.4% last year, was up 10.7% on the month. International stocks popped up 8.1%. This may feel like a welcome respite coming off a year like 2022 where everything was down at the same time, but it can lull investors into making unforced errors. Entering the year of the rabbit in the Chinese zodiac, it reminds me of an old saying: Chase two rabbits at the same time and you won’t catch either one.
It may be tempting to try to make up last year’s losses all at once. Some of what we’re seeing in the market now may be this risk-seeking behavior. Bitcoin has been an indicator of the market’s risk appetite and is up 38.5% in January.
Market drawdowns shorten time horizons and we are already seeing product pitches that are traps for investors distracted by short-term returns. Years like 2022 provide fertile ground for financial product salesmen. Prepare to hear about financial products with backtests that model amazing returns last year.
Our open architecture means we can seriously consider investment ideas from anywhere. Feel free to pass them along to us if something piques your interest. Or more likely, let us play the role of the bad guy and say no for you if the product isn’t a good fit. Don’t optimize your portfolio for what happened last year. Avoid unforced errors by sticking to your financial plan.