Streetwise for Friday, June 7, 2019
Expose your flank, and they will be on you like a pack of hungry wolves. Weakness is detected in the same way sharks are drawn to blood in the ocean, and with similar results. A no-holds barred battle, ear-biting excepted…maybe…with spoils to the winners, while losers limp off into obscurity.
No, it’s not professional sports, it’s Wall Street. Here players of every variety and size are locked in mortal battle as each try to wrest the most dollars from an investment strategy or client base.
The topic is germane because of the inundation of questions about the future of Wall Street and the outlook for the equities market. Do not allow yourself to be caught up in the hubris of the Street. And do not, in my opinion, subject yourself to those pushing a 60-40 or 40-60 hybrid portfolio of bonds and stocks.
And do not rivet your attention on the Dow Jones Industrial Average as if it was some sort of Holy Grail. It is not. Yet, there is no denying that the Dow tends to steal the show.
However, unless you happen to own all thirty stocks that make up the Dow, a poor strategy at best, you do not have a dog in that fight. You are merely a spectator looking at what are at best historical statistics. You need to concentrate your attention on buying a part of players who are on a winning team.
While you may be concerned at times over short-term market heights or volatility that is no reason to abandon starting or growing your portfolio. You need to invest, and specifically you need to invest in equities, regardless of what the market does. No investment vehicle can rival the track record of common stocks as a way of accumulating wealth.
Remember the mantra I have so often repeated…unless you are penniless and on your deathbed with no heirs, you need to always keep some portion, hopefully a large portion if not the entire amount of your financial assets in equities.
Unfortunately, there are always those who continually live in fear that somehow the stock market is out to ruin them. Such logic has never come to fruition in my lifetime nor do I expect it ever will.
Stock transactions are historical events, each being nothing more than an agreement between two individuals where one is willing to sell, while the other is willing to buy. Trying to predict how those two individuals are valuing the investment in question is not just an exercise in frustration, it is one of complete futility. Extrapolating from there, it is impossible to predict what thousands of people may or may not do?
However, what you can analyze is the economic environment that the financial markets operate in. Therefore, what is likely to happen on Wall Street tomorrow, is likely to be directly the result of what is happening in the economy today.
And what are you seeing? Rising tariffs, muted inflation, low unemployment and a Fed that appears somewhat muddled at to which way to turn…yet a relatively healthy economy, although some economic data is bringing that into question.
Does investing in stocks entail risk? Of course, it does. Change is inevitable. Problems are inevitable. Even the largest and most successful corporate monoliths are vulnerable to adversity. And unless you have access to inside information, it is impossible to predict the course of a stock in the short term.
Using inside information removes the uncertainty, but also means trading pin stripes for a somewhat less tailored look in basic orange. However, risk can be controlled and contained through diligent research.
What about market volatility and the question of whether today is the right day to invest? Would it be better to wait and watch? Wrong. There is no good time or bad time to invest. As a shareholder, you are tying yourself to the fortunes of a company, not to the fluctuations of the overall market.
Worrying about market activity or index levels is senselessness. It is normal for the investment world to overreact, sometimes dramatically so. How well this has been illustrated recently. When Wall Street is in a funk, it means that you can go shopping and spend less than you might otherwise.
Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com. Phone calls accepted between 9 AM and 3 PM at (941) 706-3449. For back columns please go to www.RuddReport.com.