“Good investors gather information, put that information into current and historical context, then make sound decisions.”
It’s the first day of Spring in the Northern Hemisphere. Weather-wise, anything can still happen. Especially in Nebraska, where today we had snow, slush, rain and temps ranging from the 20’s to the 40’s. Tomorrow we may hit 60. It’s Spring and, whatever the short-term forecast projects, the ‘seasonal’ forecast takes precedence because sooner or later, it’s going to warm up and the things that are supposed to get green will get green. It’s a Seasonality Thing. The same thing happens in the financial world, although it is not governed by the tilt of the planet versus the sun.
There are Weather seasons, Calendar seasons, Business seasons, Political seasons, Earnings seasons, and last but not least, there are Bull Market and Bear Market seasons. Some have similar drivers, like the calendar. Some are driven by longer-term influences, like political re-election cycles, and Bull Market and Bear Market cycles. The most important factor is awareness, because very rarely does it snow in the northern hemisphere in July, and very rarely does the temperature hit 80 degrees in February. Unlike weather seasons, longer-term seasons require a different type of scrutiny and analysis. Especially when it comes to financial markets.
In the investing world, if you believe that every event is like a bottle rocket that flies off in a totally unplanned and unexplainable fashion, you will always be a surprised observer, and rarely a successful participant. Things happen for reasons, especially when billions of dollars are involved. The players in a game this large never put anything down to mere chance or fancy. It is a complicated, never-ending chess match between global masters with unlimited capital and unimaginable patience. The key to success for normal people like you and I are to change the rules to conform to our own time-frames.
We can define the parameters and the variables of involvement for our own hard-earned money. This is not an exercise best left to a radio talk show, or a TV ‘investment game show guest,’ or a self-proclaimed locker room genius. It is a job for an experienced, accountable, fiduciary investment professional. It’s harder to qualify under those parameters than you might expect. But we are out there, ready to answer the hard questions, eyes wide-open.
Back to seasonality, equity markets are still enjoying the long-term, multi-year push of an economy-driven, corporate earnings-driven Bull Market. It has been in place since 2009 and, like most things that are that long-in-the-tooth, it has had a complicated evolvement and an even more complicated journey. It is larger than politics. The critical drivers are far more complex, although partisan politics continue to push the day-to-day headlines and public sentiment. Multi-year business cycles/seasons are still comfortably in the driver’s seat.
There is no bigger target for the contrarian than the long-term trend. This is especially true for those who are primarily seeking personal gain and notoriety. In the contrary, ironically, an advisor who is NOT obsessed with personal notoriety will work to put their clients in the most favorable position consistent with a long-term trend. This is in full recognizance that change is down the road, as always, and that they have a plan for that as well. That is how conscientious advisors operate. We want to take full advantage of the reality of the day. We don’t get caught up with the negative outlooks being touted by those who are seeking headlines and we remain responsive to our clients’ needs. Sounds simple, doesn’t it? But it’s not.
Edward D. Foy, Manager, SELECTOR® Money Management.
Sources: Bloomberg.com, Marketwatch.com, StockCharts.com.