What does the latest market silliness mean?
One day the market is up 500 points, the next it is down 500. Sometimes the market has moved almost 1000 points inside of one day. There is no rationality with this market right now. Market volume is spiking. There is panic selling followed by institutional buying followed by more selling. The market seems to be divorced from the fundamentals: luxury goods sellers are seeing record sales. Oil is up but energy stocks are down.
There’s a famous Rudyard Kipling poem, If, that embodies what is needed at times like these. It starts out,
“If you can keep your head while all about you
Are losing theirs and blaming it on you
If you can trust yourself when all men doubt you
But make allowance for their doubting too….”
What is most important now is not to panic. The panic in the market as evidenced by the volitility index is huge. But buying during volatile times is one of the most dependable strategies out there. On average, if an investor buys when the VIX is above 30%, the market goes up over 16% the next year.
I do not deny that the market is trying to assess the appropriate level given the uncertainty in the world right now. But investors who hold on through significant downturns are generally rewarded. Investors that panic usually come to regret it later.
Kipling’s poem closes, in a 19th century manner, by promising that one who holds on through difficult times will “be a man, my son.” A less offensive exhortation today might be that facing trouble with a sure gaze and a steady hand shows that you’re a grown-up (although that might not be quite so poetic). Let’s hope we all can act like adults during these difficult times.
Douglas R. Tengdin, CFA
Chief Investment Officer
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