📈Hair of the Dog
Another week, another faint glimmer of hope that stocks will turn around dims amid the chaos of inflation, interest rates, and Wall Street hyperventilating. Time to panic? Not to say fast my friends!
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It’s been a while since we checked in on the stock (STONKS translated to meme) market. But sometimes our hand is forced and this week it was by the bloodbath that occurred on Tuesday following a higher-than-expected inflation report.
While the $1.6 trillion number is somewhat abstract, that is a BIG number. And there was truly no place to hide as you can see in the chart above. In fact, this was the worst day in the stock market since March 2020, when this little thing called COVID was in the process of shutting down the world.
While this recent move was more violent than we have seen in a while, the market has been in a bit of a rut in 2022.
Don’t say we didn’t warn you. We sounded the alarm in early January after the S&P 500 broke through its 200-day moving average. Since then, well, it's been a bit ugly as the SP 500 is down over 17% YTD despite several attempts to rally back.Â
This chart and the violent day-to-day moves got us thinking about a passage from a book that was recently highlighted by Ben Carlson via William Bernstein. It describes how one fund manager describes the day to day movements of the stock market.
We love this analogy because everyone can visualize that excitable dog, and how easy it is to get distracted by it. I mean who bothers to look at the owner?
At times it may seem like the dog is in control, running and pulling the owner off its path on the leash. Just like market events can knock the stock market off its long term path. And days like Tuesday can feel an awful lot like the dog has completely taken control.
At the moment this is understandable, especially when the year hasn’t been kind to stocks already. But it’s important to zoom out on these situations because the stock market is still up over 15% from pre-pandemic levels and more than 70% from the pandemic lows. And once again we would like to highlight a chart we were reminded of recently by Michael Batnick about how there are always reasons to sell.
Like anything in life, if you want to search for the negatives you can probably find some, and when we are talking about something as complex as the stock market you can always find something. You have to worry about the Fed, politics, and sadly as we have learned - pandemics.Â
What’s the Upside?
Just like we have no idea what a dog is thinking while it wanders around the park on its long leash we often have no idea what is going on in the stock market. Sure we can assign a lot of narratives and project our assumptions but in the end, none of that really matters.
By simply ignoring the noise and remembering you are investing in stocks for the long run we can be at peace amidst market volatility. Stock investments are not for today, or tomorrow and or even next year. And as we saw in that chart above despite infinite concerns the stock market continues to march up and to the right, much like our oblivious dog walker.
For Your Weekend
Read:
The Amazon Experience Comes to the NFL by Rodger Sherman (The Ringer)
Thursday night’s Chiefs-Chargers game showed that Amazon won’t revolutionize how football games are broadcast; it’ll just try to sell you Prime as you watch.
Wall Street Reacts to Adobe Buying Figma (Amal Dorai via Twitter Thread)
Perhaps one of the most under-reported trends in our day is the shift from legacy software like MS Office to cloud-based solutions like Google Apps and Figma. It’s a genuine feat of engineering that any of this stuff works at all. Amal Dorai, who built a start-up to make MS Office collaborative, takes you through Adobe’s recent acquisiton of Figma. Note: you may need a Twitter account to read.
Listen:
🚨Politics alert! Proceed with caution🚨
General Mark Hertling: Russia’s Awful Army (The Bulwark Podcast)
Let’s not forget that Russia invaded Ukraine to kick off the year, an event partly responsible for some of the persistent inflation we’re seeing now. Gen. Mark Hertling (ret.) (read his Wikipedia page) takes host Charlie Sykes through the state of the conflict and the impact US-led efforts have had on the outcome so far.
Chuckle:
