Skip to main content

Sound Advice: March 29, 2023

Stocks Are On Sale

One can only gag at the ongoing silliness of those who attempt to make sense of the daily ups and downs of the stock market and where it might be headed.  Although there has been an increasing amount of attention being paid to interim volatility, that’s what short-term movements are all about.  From Day One of my career, when the Dow was hovering around 600 (Yes, only 600!) to where it is now, more than 50 times higher, there have always been periods when the numbers move all over the place, yet the bottom line is that the long-term trend is up.

Given the built-in bumpiness, it’s essential to be aware that the prospective trajectory is one that’s likely over extended periods.  What happens today, tomorrow, next week, next month or next year is anybody’s guess.  And guess is the correct word.  No one knows and anyone who claims to know is a charlatan.

Investors continue to obsess about the market pullback of the past year as if this kind of thing is unusual.  Temporarily painful, but most certainly not unusual.

Better to view current stock levels as better prices than were available a couple of years ago.  If you thought stocks were interesting in late 2021, one would think that today’s lower prices would make them more appealing.  Yet, despite the fact that demand for most things tends to increase when prices are lower, people’s reactions to reduced stock prices are exactly the opposite.

If you have doubts about today’s values and worry that things will get even worse, I suggest to you that the Dow Jones average will hit 50,000 before it hits zero.  Indeed, it’s a bet I’ll happily take since the odds of a plunge to zero are 0 in 1 Googol.  (For those who aren’t familiar with that number, it’s 1 followed by 100 zeroes.)  Ain’t gonna happen.

The last big market drop was back in 2008-09, at the back end of a market decade that saw essentially no upward progress.  Not surprisingly, the next 10 years saw average annual gains well into double digits.  Given that performance, it seems reasonable to expect a resumption of progress ahead.

When will that happen?  Can’t say, but a moderating pace on the part of the Fed would help both stocks and bonds.  If allowed to speculate, I’d look for stocks to be higher a year from now, but that’s based on nothing more than a gut reaction.  Three to five years from now, however, it would be reasonable to look for solid gains across the board.

N. Russell Wayne, CFPÒ

Any questions?  Please contact me at nrwayne@soundasset.com


Comments

Post a Comment

Popular posts from this blog

Sound Advice: January 3, 2025

2025 Market Forecasts: Stupidity Taken To An Extreme   If you know anything about stock market performance, you can only gag at the nonsense “esteemed forecasters” are now putting forth about the prospective path of stocks in the year ahead.   Our cousins in the UK would call this rubbish.   I would not be as kind. Leading the Ship of Fools is the forecast from the Chief Investment Strategist at Oppenheimer who is looking for a year-end 2025 level for the Standard & Poor’s Index of 7,100, a whopping 21% increase from the most recent standing.   Indeed, most of these folks are looking for double-digit gains.   Only two expect stocks to weaken. In the last 30 years, the market has risen by more than 20% only 15 times.   The exceptional span during that time was 1996-1999, which accounted for four of those jumps.   What followed in 2000 through 2002 was the polar opposite: 2000:      -9.1% 2001:     -11.9% ...
Post a Comment
Read more

Sound Advice: January 15, 2025

Why investors shouldn't pay attention to Wall Street forecasts   Investors shouldn't pay attention to Wall Street forecasts for several compelling reasons: Poor accuracy Wall Street forecasts have a terrible track record of accuracy. Studies show that their predictions are often no better than random chance, with accuracy rates as low as 47%   Some prominent analysts even perform worse, with accuracy ratings as low as 35% Consistent overestimation Analysts consistently overestimate earnings growth, predicting 10-12%                 annual growth when the reality is closer to 6%.   This overoptimism can                 lead investors to make overly aggressive bets in the market. Inability to predict unpredictable events The stock market is influenced by numerous unpredictable factors, including geopolitical events, technological changes, and company-specific news.   Anal...
Post a Comment
Read more

Sound Advice: July 16, 2025

Fixed annuities are poor investments Fixed annuities are often criticized as poor investments for several reasons, despite their reputation for providing stable, predictable income.  Here are the key drawbacks and concerns:   High Fees and Commissions Internal Fees:  Fixed annuities can carry a range of fees, including administrative charges, mortality expense risk fees, and rider fees. These can add up to 2%–4% per year, significantly eroding returns over time. Commissions:  Sales agents and financial advisors often receive high commissions for selling annuities—sometimes as much as 5%–8% of the invested amount. This creates a financial incentive for advisers to recommend them, even when they may not be the best fit for the client. Comparison to Other Investments:  Mutual funds and ETFs typically have much lower fees and commissions, making them more cost-effective for long-term growth. Limited Growth a...
Post a Comment
Read more