“A challenge only becomes an obstacle when you bow to it.”–Ray Davis
One of the many difficulties of staying on the path defined by your wealth management plan is the waiting.
The process of waiting for things to unfold is further hampered by the avalanche of data flowing at us these days – from every direction and through every type of media. Given the newest gadgets – always making it easier to “stay in touch” – the process of turning down the volume so to speak, has become more difficult.
As emotions rise – so too does that ugly word – volatility.
Somehow, over the years of Wall Street messaging, “volatility” has been sold as something to fear, to recoil from, to try hard to avoid, to erase whenever possible. The more deeply-seeded the fear becomes, the more “products” Wall Street will create to “help allay your fears…”
Here is the dirty little secret: All that effort to erase, avoid, step around or “miss” volatility has one very compelling certainty – the rate of return is dramatically reduced as well.
Volatility is not risk. Volatility is a cohesive part of “the market.” No volatility – little to no return. Volatility – and its meaning to you – must be reframed and better understood: it creates your future rates of return.
The problem? The waiting.
So, just when you thought nothing more could be thrown at 2020 to further drench it in crimson red – forever in the history books – the President gets Covid. Ouch.
I won’t go into it deeply – but suffice it to say that the media’s last stand is the next 28 days. Good Lord is it set to be nasty. Our job?
1) Wait patiently
2) Overlook the fog ahead and focus on the higher values building
The economy is coiling. Just as one would think it is ready to collapse, it continues to surprise…to the upside. My almost 4 decades have taught me a few things: one is the tougher and uglier the setback, the bigger and more robust the “always surprising” recovery.
One need not buy into those words. One need only to think back in history to the terrible times and horrible events of the past – then unimaginable – just as we are feeling today.
ALL of those previous periods have one major thing in common:
They took place at much lower price levels in the markets.
The Short-Term Issue
As we all saw late yesterday, the short-term issue is what we have covered for a couple weeks now as we trekked through the choppy September – for the next 27 days it is wall-to-wall politics – nasty rhetoric, deceptions, vitriol.
The good news in that? With patience, one finds that we have had lots of Presidents, members of Congress and Senators since 1982 when I started. In that time, many terrible things happened. Over that same period – while all of that was unfolding – the DOW went from sub-1000 levels to 28,000 today – and single digit percentages away from all-time highs.
The key word in that thought? While.
Markets, business and people adapt. We live in the country that is the best at adapting on Earth. Together, we will accomplish more in the next 10 years than we have in the past 30+.
We will look back and thank Generation, Y and The Barbell Economy™ for that accomplishment.
For a refresher on that – click the image below for a short video review of the larger events unfolding ahead:
And please try hard to consider these elements while we take in all the stress of the last pre-election weeks. It will be easy to fret and worry. It will be easy to buy into the crowd psyche. It will be easy to fall into the dark thinking process that drives the naysayers.
It will be easiest of all to forget that those naysayers have been screaming from the rooftops – every year – since I started in 1982.
What won’t be easy – is why building wealth is hard. It takes an understanding that long-term investors learn stressfully over time.
The data below remind you where the crowd is – their sentiment stinks. As the red boxes tell you – the other times when sentiment was in the tank were not long-term highs – ever.
As we all know, we get to choose how we each take this in over the next month or so.
Focus, patience and discipline usually win out. There is nothing sexy or flashy about that. As history teaches us over and over again – the ability to stay focused on the long-term benefits America creates from its people has been the winning hand.
Just check the collage of data thrown at us over the last six months alone as a reminder from Bespoke:»
The point to all of that? Proving once again that ignoring most of what comes in over the bow – is more beneficial to your wealth and security over time.
Last for Now…
While there is admittedly a mountain of improvement still to climb, and much retraining to do for lower-paying jobs lost, jobs improvement from the darkest days a few months ago has been significant:
Again – a long way to go – but just remember in the midst of the coming weeks – and likely chop,America is the best in the business of recovering, rebuilding and overcoming – bar none.
So what Mike?
In closing, let’s consider this together – one’s preference (this is not intended to be a market call) would be to see chop and angst continue into the latest stages of October. Recall last election saw a record string of down closes – and then up for basically 3.5 years.
Likewise, this time around we will also be in the early stages of Q3 earnings reports – with a vital focus only on the 2021 chatter and projections. The Q3 data will be media fodder and grist in the mill, churning your gut with concerns that will mean nothing 90 days from now.
Hence, let’s hope for softness moving into the election. And if we are lucky enough to see that unfold – remember it is merely the spring-loading of the economic recovery and a new foundation for the next leg up the mountain.
So – when the Grim Reaper knocks on the door of your mind and stokes your fears — laugh at him and look forward – not back.
This rocket-ship ride is just getting loaded up for the trip.
Long-term investors have learned that when all of the above ingredients are baked into the pie, the road ahead has been marked by a clear and resounding message:
…surprises to the upside.
It is our job to withstand the assured storms ahead and be disciplined in our planning for clients’ goals.
It is imperative one remains patient during the quiet times. Sure, more choppy waters are likely as the election approaches. Sure, media will do its’ best to knock you off your focus, grabbing at your fears and taking you off your pathway.
Rise above that tension and pull your seatbelt tighter.