What impact will a ‘soft-landing’ have on current stock valuations And does there need to be a recession to experience a meaningful (e.g. 12%+) decline? My short answer is no. The gist of this post is to remind investors that you don’t need a definitive line-of-sight to a potential recession before protecting gains. I say that because recessions are lagging events – which come at the very end of the cycle. By the time they arrive – the economic damage is already done. Therefore, we need to be in front of the curve. Typically in the 9-months leading up to a recession – stocks continue to trade at or near highs – as analysts raise their outlooks. Unemployment and earnings are usually strong – as GDP keeps its head above zero. But those who are able to understand where we are in the business cycle will pay careful attention to what’s happening shortly after peak economic growth.
When the Laws of Probability are Forgotten
Whilst the S&P 500 posted a negative week – it was a strong month for equities. The world’s largest Index managed to add 4.8% for the month – hitting an intra-month record high of 5339. That’s four of five winning months to start 2024. Perhaps completely enamored by all things AI (more on this in my conclusion) – investors basically shrugged off sharply higher yields and a series of disappointing inflation prints to push prices higher. What could go wrong? At the end of every month – it pays to extend our time horizon to the (less noisy) monthly chart. And whilst the weekly chart is useful – it tends to whip around. Longer-term trends (and perhaps investments) are often better examined using this lens.
Is the Market “Euphoric”?
It’s that time of year… where “Sell in May and Go Away” makes its typically annual appearance. Personally I don’t give it much weight… basically none. Who invests with the timeframe a few months? Not many that consistently make money. But therein lies the rub – this saying is only relevant as a function of how you choose to invest. Your time horizons are likely very different to mine. This post will offer background where the adage comes from. From there, I will try and answer the question of whether the market is “euphoric”. And finally, I’ll share some names that I’ve been adding to…. it’s not NVDA.
89 Books to Make You Smarter
“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time—none” – Charlie Munger. This post includes a collection of 89 books I’ve read which will make you smarter (and a better investor). Old Charlie also told us “.. if it’s wisdom you’re after, you are going to spend a lot of time sitting on your ass and reading”. Amen to that.
For a full list of posts from 2017…