“A bull market is a bull. It constantly tries to throw off its riders.” – Richard Russell
Hi all,
As the S&P and Nasdaq make all-time highs it’s important to look back at where we’ve been, why we continue to stress the boring (low-cost ETFs, diversification, etc.) and while those dynamics are not the holy grail of investing, we don’t see a need to change our tune until the market changes first.
I will be the first one to tell you. I didn’t think we’d be here. If someone had told me there would be higher corporate taxes (tariffs), massive uncertainty in the domestic and international political scenes, and literal acts of war, I would have said we’d be 20% lower, until those things get sorted out. And it’s the speed of the sorting that’s been the real surprise. Tariffs have been a boon to the coffers of the United States without raising prices for most consumers, a deficit-expanding, tax-cutting bill is currently making its way through Congress, and inflationary pressures continue to subside just as the labor market starts to soften a bit, leaving the door open for rate cuts in the second half of 2025 and first half of 2026. Warren Buffett said it best, “If you mix politics with your investment decisions, you’re making a big mistake.” Here’s a reminder why.
Bear markets and large draw downs are part of the deal. The longer you’re in the market, the higher the likelihood you’ll experience some tough times, but it’s how we handle these tough times that makes all the difference.
Another reason why we’ve been preaching “stay the course” and “rebalance” isn’t because we read it in a book somewhere and don’t have an opinion of our own, it’s because it’s worked. In fact, it’s worked better over the last 15 years than any other rolling 15-year period since 1970. There’s a little bit of cherry picking the data as 2010 followed one of the worst bear markets in history, but the optimal strategy here was to be long stocks through thick and thin. Those of you who lived through 1974-1982, and even 1998-2009, know that longer periods of stocks moving sideways is absolutely possible. Coupled with the complacency in today’s marketplace with rallying cries like “buy the dip” and “stocks always go up” it all just feels a bit misguided. But just as we should be diligent about the rug being pulled out from under our feet, we should give the same credence to the possibility of a bull market run lasting longer than we think.
Given the stock market’s proclivity for looking past short-term uncertainty because future help is on the way (rate cuts, tax cuts, trade deals, etc.) we continue to believe that any pullback in the market should be an opportunity to put more cash to work. That being said, we’ve been waiting for several weeks for one of these dips to materialize, but have yet to see anything that offers even the smallest amount of value. We remain patient to get clients up to optimal stock allocations and are steadfast in waiting for the right opportunity to jump in for those of you making periodic contributions, rollovers, etc.
“Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.” – Morgan Housel
Happy 249th Birthday America!
– Adam