Staying Positive Amid The Summer Doldrums
The market this year has been split between areas of tremendous strength and sectors of depleted optimism. Nowhere is this better illustrated than the divergence between soaring growth stocks and underwhelming value names. When you add to that the mess of commodity prices and lackluster action in bonds, the picture becomes very murky indeed.
Most diversified portfolios are likely sitting on very meager gains so far this year. Some may even be slipping in to the red as we head deep into the choppy summer months. Everyone is ready for a break one way or the other in the market, but the next big move appears quite difficult to discern. The tug of war between the bulls and bears is relentless.
In this type of environment, it’s very easy to get pessimistic or feel an urge to make significant changes in order to reap every basis point you can out of the remaining five months of the year.
Shaking things up may seem like the easy way to go. It provides immediate relief from the summer monotony and adds a sense of action or purpose to what has become a very sideways market. Nevertheless, making drastic changes to your portfolio in order to jump on high priced growth stocks late in the game or pick a bottom in gold miners may prove to do more harm than good.
It’s often difficult to stick with a proven investment system spread amongst a diversified array of asset classes when the going gets tough. Investors are quick to forget that the market can experience periods of consolidation for months or years without any definable trend. Trying to time every move in between can often be difficult and lead to an exasperating emotional roller coaster.
Let’s put things in perspective, we are 2.50% from the highs in stocks. Most broad-based bond funds are trading near the flat line for the year and commodity funds are sucking wind big time. Yet in the grand scheme of things, this hasn’t done a significant amount of technical or fundamental damage to the market.
Everyone is worried about risks in overseas markets like China and Greece, market breadth has been horrible, we are on U.S. politician overload, and now we have to worry about whether or not the Fed is going to raise rates. It’s a lot to take in and account for over the next six to twelve months.
One of the best things you can do for yourself and your portfolio is to tune out the majority of this noise. Instead of focusing on the negative, make a personal objective to think positively about the opportunities in front of us.
That may include taking some time away from the markets this summer to decompress, spend time with family, or pick up a new hobby to work off stress. For instance, I’m extending this upcoming weekend to a four-day event in order to attend a family reunion down in San Diego. I think the short-time away from the market will be well spent in reconnecting with extended family and getting the chance to experience a new adventure with my two young sons.
Another way to positively impact your investing endeavors is to compile a reading list to enhance your education this summer. Ben Carlson of the blog A Wealth of Common Sense has a new book out that is on my list. Mebane Faber is another extremely smart and talented portfolio manager that deserves a look as well. That’s just a short sample of some excellent writers and investors that may be worthy of your attention.
The Bottom Line
Successful investing is difficult under the best of circumstances and we are certainly not experiencing optimal conditions this year. Rather than fret about what you could or should have done with your money in hindsight, focus on the big picture and stay positive about achieving your goals. There will be plenty of points in the future to put money to work in areas offering a solid risk to reward proposition given the excesses that have been worked off this year.
FMD Capital Management, its executives, and/or its clients may hold positions in the ETFs, mutual funds or any investment asset mentioned in this post. ...
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