Recent Market Outlook
Major US indices have seen broad swings and choppy moves, along with sharp drops – largely driven by AI fears in the technology sectors. Investors are thinking about which companies to put their money on, and, after seeing many companies spend enormous abouts of money on AI infrastructures, there is a large fear of AI replacing a lot of tasks and software that are used with regularity.
Downturns can feel worrying. The key for long term investing is to stay calm, focus and try not to panic over short term market swings. These moments are where we often share ‘our favourite chart’ to demonstrate how the market has behaved historically, and how it is expected to continue behaving in the future:
Market returns have never been a straight climb. We experience, just about every year at some point, regular declines of 7-10%. Yet despite these regular declines, the market continues its inexorable rise. Generally, when the market declines there is always some trigger(s). Often these end up being a misunderstanding about the economy and the financial system.
We view the current conditions as simply the market going through a correction. However, we are aware that times like these can prove to be quite unnerving even for the seasoned investor. The reality is that no-one really knows when the market is going to enter a correction or when the market will stabilize. From our experience, we have found that people who try to time the market instead of investing whenever they have money available often miss the inevitable rally that comes after a correction. Research has shown that those who do try to time the market usually end up investing at much higher levels than simply investing whenever they had money available in the first place.
In the short term, the markets are very difficult to predict. This difficulty is one (of the many) reason(s) why we stress long term investment thinking vs. short term investment thinking. It is obvious when looking at our favourite chart above: in the long term, the market is more predicable, with an upward trajectory.
We are very passionate about this subject and think about it quite often. In situations like this, where the market is experiencing a correction, we align what we do for ourselves with our clients. That is, whenever money is available, we invest.
