“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”
– Peter Lynch
This is the February ugliness noted as the month began. Recall the notes of the time. The idea that history postures for us here is that the honeymoon is over for the new administration and now the tough part of actually getting things done is at hand.
Fear is rising rapidly – which is also a plus. Keep in mind, you can read “investors are too bullish” all day long. Be assured you merely need a week or two – or three – of red ink and you will see that “bullishness” vanish faster than you can shake a stick as they say where I grew up.
It’s working: We have already fallen back to 50:
Consider this as a “buy the rumor, sell the news” window of time. Markets rightfully saw through the terrible news of the virus and instead witnessed a bright horizon. The journey is young and the game is just beginning.
Corrections and windows of chop in the market have been forever designed to confuse. Those without plans or a pathway to focus upon are driven from the market out of fear. Typically, those weak hands have already arrived late to the game, bought too high and/or have no long-term plan driving their comfort and focus. This is a cycle which has been in place since the beginning of market data.
It is unlikely to change anytime soon. Which is good.
Remember, corrective waves create the spring-load effect of surprising upsides. No pain – no gain. No surprises in the offing. No fear. No fear leads to high prices. High prices leads to frenzy. Frenzy leads to correction. Correction leads to fear.
Without corrective waves, your returns over time, fall – they do not rise.
Improving earnings. Improving margins. Improving order flow. Improving manufacturing. Shortage of chips due to high digital transformation. Interruptions in supply chains as more are brought back to US. These are all signs of a growing and expanding new world ahead.
- Let the corrections come.
- They are a benefit – not a curse.
- And yes – it is perfectly normal for the front-runners to take the most arrows and biggest hit.
- It is the process of re-entrenching fears for the crowd which pays long-term investors for their patience over time.
We will all hear every word dissected repeatedly from Fed Chairman Powell as he is questioned by Congress today and tomorrow. Experts will give you 15 meanings for each one of his phrases.
It will be healthy to witness a couple weeks of chop and angst – as we can expect a solid reset and a positive economic footing as we head into the Spring and Summer.
Rest assured I recognize some of this is repetitive. Building muscle requires the same actions on a regular basis. Without them – atrophy sets in and it become easy to get caught up by swayed emotions. That becomes an even simpler trip-wire to trigger as prices trudge higher and higher up this very long mountain pathway we are on ahead.
The mind-game is even tougher to get your arms wrapped around when the media is pouring bad news into your life with a double-barrel firehose.
Sadly, this dichotomy is unlikely to end anytime soon and the stats above prove it for you.
We must all remain diligent and prepared to always stand tall against the storms. Standing apart from the crowd permits one to always be ready to do what most will not.
Get comfortable with this theme…it will be with us – forever:
Corrections and setbacks serve a role – they build your value for the next run – and we are unlikely to get very many of them in the years ahead.
Even when they hurt in the near-term, they create the gains of the long-term.
Stay focused on what many will not see. Think above the clouds. Try hard to not get lost in the fog. See the horizon which is far beyond – and vastly more beneficial – than the headlines.
Many storms will still arrive on our shores – and then they will pass.
It is our job to help you remain focused on your pathway. We are more excited about that today than ever before.
- The future is brighter than currently perceived.
- The Decades of Disruption ahead carry massive opportunity…
For the prepared, patient and focused long-term investor.
Buckle up and pull that harness tight…this ride is just getting started.