Stronger tools to be patient, grateful
By Kyle Tetting
Each week, a few of us gather around the table in the back conference room to record our Money Talk Podcast. It’s an opportunity to share insights from the week, provide updates on the market and share what we’ve been hearing from clients — comments, questions, concerns.
It’s a highlight of my week to engage with colleagues on that level, especially because I know the goal is to continue to educate investors on a fast-changing environment.
Amid the regular rotation of podcast topics, my favorite tradition is the annual podcast focused on giving, released the day after Thanksgiving. The podcast is focused not on where or how much to give, but how we can best use our resources for the greatest impact on those individuals and organizations we value. Most importantly, it reminds us how much we have to be grateful for.
In the vein of gratefulness, I’d be remiss if I didn’t mention how strong of a year it has been for investments. But, perhaps more notably than we’ve seen in a while, it has come in fits and starts.
Last year, 2022, was a down year. Maybe it’s hindsight bias, but I’m impressed by how much negativity is so neatly encapsulated in that one calendar year. For most of 2022, it felt like no amount of good news was enough to pull markets higher. Portfolios peaked at the start of the year and never recovered.
The first 11 months of 2023 took an entirely different approach. We entered the year on a bit of a run, and stocks continued rallying through much of the winter only to be taken down by the banking crisis centered on the West Coast. Absent intervention, that setback had the potential to be much more destructive, but swift action by bank regulators allowed investors to recover by summer.
Banking issues weren’t our only bout of uncertainty in 2023. An ever-looming budget crisis entailing government shutdowns further contributed to the noise. Add an ongoing war in Ukraine and the reignited Israel-Hamas war, and it felt for much of late summer and early fall that stocks struggled to find their footing.
Amid all the turmoil, and with October account statements still on the top of the pile, the numbers we’ll soon see for November may paint a picture very different than what we were expecting.
There’s still some trading left in November as I write this, but the S&P 500 has flirted with high single-digit returns for the month, nearly doubling what already was a strong year. After a nearly three-month lull for stocks, fortunes changed in a matter of weeks.
None of this is new. We’ve argued for years that you can’t time the stock market. And the latest stretch may wind up being one of the best examples of that.
If you read the headlines, watched the politicians and merely looked at historical averages, you’d assume that the late summer/fall slide was symptomatic of a market headed much lower. Responding to those assumptions by selling stocks often results in missing much of the eventual upside.
The 10 best trading days of 2023 – as of late November – accounted for all of the S&P 500’s return so far this year, a not-so-rare occurrence in the context of stock market history.
What is rare is that any one investor is unlucky enough to miss all 10 of those days.
But many of those best days tend to come bunched together, and often amid stretches of broader volatility. So it’s easy to see how fear of volatility would lead to the selling off that results in missing the next upswing.
The difference between an OK year and a great year for most investors is often more about conviction and patience than it is simply avoiding a down stretch entirely.
If conviction and patience are key, we need tools that help us see beyond the current trends. This is where balance comes in.
And now with less volatile investments like money markets and bonds offering attractive yields, the pieces that are supposed to allow for patience finally add to the conversation. The specifics of that conversation are unique to each investor. However, the overarching theme is that at a time when bonds and cash offer meaningful ballast to risk taking, investors finally have a tool to help remain patient and capture those few, significant, unpredictable days of strong returns.
For all of this, I remain grateful.
Investor guide to giving wisely, the 2023 Giving Podcast
Balance beats timing (and uncertainty), by Kyle Tetting
Why investments outperform their investors, a Money Talk Video with Kyle Tetting
2023 Investment Outlook Seminar, a Money Talk Video with Bob Landaas, Kyle Tetting and Dave Sandstrom
(initially posted Nov. 30, 2023)