Following a little snow on the pumpkin yesterday, today we find ourselves a full 10 months through 2023. This means there are only a mere two months remaining in what has been an unpredictable year.
This year started with concerns about a recession which still has not arrived, optimism about bond prices benefiting from falling interest rates which have instead gone up, and expectations for slowing corporate profits which have remained surprisingly strong.
The reality of 2023 has had very little resemblance to experts’ well-reasoned opinions about how it would unfold at the beginning of the year.
After a rough 2022 in the financial markets for stocks and bonds, I get the impression that many of our clients held high hopes for 2023. They assumed their portfolio values would bounce back in the early part of the year, but they had to wait until the middle of summer for an upswing. And now the latest stock market regression is sincerely testing some long-term investors’ patience.
Will 2023 end with a swell of positivity to rekindle our long-term investors’ stamina? It is tough to say. Personally, I find it easier not to have short-term expectations. Humbly admitting that I cannot predict the future given the infinite number of variables in today’s world is simply telling the truth.
It is really easy to list what could go wrong in the world over the next two months. Just turn on the television or look at your social media. What is harder to imagine is what could go right. To the best of my knowledge there are no cable channels or social media apps dedicated solely to potential positive outcomes.
But is today’s world more scary or less predictable than the past? We have a tendency to think so because the past is now known and “understood.” However, before the past became the past it was the present. And before it became the present it was the future – which is just as unpredictable today as it was when the past was the future.
Over the last 100 years we have overcome the Great Depression, World War II, the Korean Conflict, the Vietnam War, Watergate, massive inflation, sky-high interest rates, a Cold War, Y2K, terrorist attacks, the Global Financial Crisis, and thousands of other economic and political events I choose not to mention even though they were screaming headline at the time.
While the stock market initially fell in knee-jerk reaction to all of them, the long-term trajectory from 1923 to 2023 is definitively upward sloping. The simple solution to profiting from this trend is overly abundant patience over long periods of time.
While all of us would enjoy a fantastic two-month reprieve from our current patience test, the reality is it may take more time and more patience before the markets cooperate and continue on their long-term upward trajectory.
Whether it is the next two months or the next two decades, stick to your personal financial plan and tune out the distracting noise that leads so many astray.
Quote of the week: Donald Rumsfeld: “I would not say that the future is necessarily less predictable than the past. I think the past was not predictable when it started.”