By the time the time you read this, the midterm elections will be over and the votes counted (at least most of them). Longtime clients know that our advice is to keep politics separate from your portfolio.
The Dow Jones Industrial Average had its best month since 1976, up 14%. The S&P 500 returned 8% while the NASDAQ rose 4%. Exemplifying the trend away from asset-light growth companies and toward high-quality value, Exxon Mobil is back in the top 10 largest S&P 500 companies while Meta Platforms (Facebook) dropped down to 24th largest. Exxon is up 85% this year while Meta is down 72%.
The big news for November is that the McRib is back. What does this have to do with investing? Annualized, the S&P 500’s returns are historically about 19% higher when America’s favorite boneless pork patty is on the menu. One can’t help but wonder how much of a relationship other data points have with the market. Whenever I hear someone make investment predictions based off of a single data point, I smell BS – Barbeque Sauce.
There is fear that a recession is just over the horizon. Market pain typically precedes recessions and has visited already. It has been especially acute in growth stocks, bonds, and everyday consumer buying power. Media reports make it seem certain that dark times are ahead. However, certainty is the killer of financial performance, both on the upside and downside. Certainty stops investors from preparing and increases their reliance on prediction.
The more investors panic, the more susceptible they are to Wall Street marketing. Wall Street wants to put your money in motion in the hopes that they can skim a little off the top. Panic-trading gives investors a sense of control, but steadily erodes wealth. There is always a new crisis to sell or shiny new strategy to buy. If it doesn’t blow up entirely, the investor’s portfolio is steadily eaten away by fees and taxes.
Just because we’re not panicking doesn’t mean we’re not acting with urgency. Investors are being paid to wait, even in short duration bonds. We are closely monitoring the markets for opportunities to deploy dry powder. In the meantime, rebalancing and tax-loss harvesting continue to play a key role in long-term financial success. Now is an important time to remember the ‘why’ of the portfolio. Is it to beat the market today, this week, this month, this year? Or is it to provide for a certain lifestyle, legacy, and peace of mind?
Thanksgiving is when many of us reflect and give thanks for the blessings of the year. At Fairway, we are thankful for the opportunity to serve our clients and that so many of you had good things to say about us to friends or colleagues. Most people don’t get to work in a field they enjoy, but we do, and we are truly grateful for the opportunity. Thank you.