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Sound Advice: September 13, 2023

What’s a Market Strategist?

Funny you should ask.  In plain English, it’s typically a grossly overpaid, pompous man or woman working at a financial institution who pretends he or she has the extraordinary gift of being able to see the future.  These people periodically give forecasts of where the market is going, provide lengthy lists of reasons for these forecasts, and have the enviable record of continuing to spout utterly ridiculous nonsense.

Market strategists love to embrace data over extended periods (sometimes from the beginning of time), which they would have you believe has a direct impact on the path they see ahead.  In the interest of appearing to cover all the ground in their presentations, they pay homage to the bizarre “field” of technical analysis, the value of which approximates the lowest of negative numbers.  Speculation based on price patterns of stocks is voodoo, nothing more.

Rather than swallowing these periodic regurgitations of rubbish, one would be far better off appreciating the reality that the long-term trend of the market is up, but typically one out of three years, on average, registers weak results or slips.  Yet in spite of this, market strategists always forecast gains.

Over time, stock prices are driven by the underlying results of the companies involved.  But in relatively short spans, the operative force is changing investor psychology.  Also of note is the influence of interest rates.  Rising rates tend to weaken stock prices.  Easing rates tend to strengthen stock prices. 

As we all know, important news of the day, whether economic or geopolitical, can trigger sizable moves in either direction.  None of this is predictable.

Other considerations include seasonality and tendencies during the four years of each presidential term.  It should be noted that stock price gains tend to be greatest during the first and fourth calendar quarters of each year as well as in the third year of presidential terms.

With that said, however, there are always deviations from the norm.  In all cases, it will be helpful to maintain a focus on the longer term, at least three to five years, and disregard interim developments.

Don’t even think of paying any attention to the shamans of Wall Street, whose value is nothing more than imaginary.  I recall a presentation by one of these esteemed gentlemen whose early-2020 comment about Covid was that there was nothing to be concerned about.  Yup!

N. Russell Wayne, CFPÒ

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


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