The drumbeat of this Periscope is optimism, based off life experience and research. I fear it may be your only voice of optimism. The cacophony of negative news around this incredible economy and equities market is astounding.
Just this last week, economists concluded that the most recent three months, Q4 2018, was a good one for the USA. In fact, the rate of growth was 30% better growth than they thought just a few months prior. This is incredible!(?). Did you hear anything about that? Perhaps only here…we are in good times, economically-speaking.
It’s just so hard to relax!
Source: Zacks Investment Research, February 28, 2019.
Even if the economy is good, what about our investments? Things are bad; doesn’t it feel that way?
Equities are shooting upwards after declining the fourth quarter of 2018. This is an incredible recovery! Does it feel like that? But a V-shaped recovery is common for equity markets. Was the fourth quarter all that bad if we recovered just two months later?
With a perspective, we can see today’s equity markets are behaving as always. This short-term craziness is average. This long-term growth is awesome, and good, and common. In the past five months, the shape is a “V”. After a decline, the market usually comes back strong.
One more thought about the economy. Stop paying attention. As Dr. Howard and the team at Athena Invest point out in a recent article, no economic news gives you reliable information you can act upon with your investments. Instead, equity markets predict the economic news—badly. This chart shows it well.
Equities bounce around while the economy keeps on, keeping on. Equities grow at a big, average annual rate and the economy grows at a smaller rate per year. What can we do?
Accept that we cannot control the short-term results of our long-term investments. Accept that no one knows the future. Instead, financial news media make up reasons why markets move over the short-term; this causes us to think wrongly that “current economic conditions drive stock prices. In fact, it works the other way around with the stock market currently pricing in future expectations of the economy.”
And relax. As hard as that might sound. Things are well.