Quarterly Client Letter – October 2023
Maybe that adage about things turning on a dime should be adjusted for inflation along with everything else these days. Because, at least where the market is concerned, it seems every quarter can turn on you.
As we reported last July, there had been plenty of news that could have dampened year-to-date returns at the time. And yet, most disciplined investors had instead been richly rewarded for sticking with their appropriate investment allocations while most markets fueled surprisingly strong growth.
In many respects, market conditions haven’t changed all that much since then. We’re still grappling with economic concerns over interest rates, inflation, and recessionary conditions. U.S. government showdowns continue to loom large, as does an array of ongoing global threats. The price of oil is still problematic. Student loans and union unrest remain unsettled.
So, why the turn of returns? Third quarter results didn’t exactly take a nosedive; many returns remained positive year-to-date. But comparing recent results to the growth spurt just prior, analysts have been describing current market conditions with words like “blunting,” “sputters,” “retrenchment,” “run out of steam,” and “sideways performance.”
Should we get out our umbrellas? Essentially, there are two paths we could take.
We could react to the latest forecasts: Many third-quarter forecasts are calling for rain. Following suit, investors who become lulled by the drumbeat of quarter-end sentiments tend to ask predictive questions: What if worse does come to worst? What if it doesn’t? Which “experts” are reading the right tea leaves?
Unfortunately, only hindsight offers dependable answers to these sorts of questions, long after the information would be useful to trade on. This is why true experts warn us against getting mired in market moods:
“Perhaps the thing that ‘expertise’ or 40 years of studying something really can certify is when I don’t know, but I know for sure nobody else does either! So buckle your seatbelt and brace yourself for uncertainty.”
— John Cochrane, The Grumpy Economist
“There are more ways to arrange a 52-card deck than there are atoms on Earth, which means that every time you shuffle a deck of cards, the same order of cards has probably never been seen in human history and may never be seen again.
Note to self: The global economy has many more than 52 variables.”
— Bob Seawright, The Better Letter
“I am here today to cross the swamp, not to fight all the alligators.”
— Rosamund Stone Zander, The Art of Possibility
We could keep our eye on our destination, rather than tangle with current events: Because none of us can possibly know what’s coming next, we prefer asking questions about matters we can expect to control: Does your mix reflect YOUR financial goals and risk tolerances? Are you effectively diversified among and within a sensible mix of investments? Have there been any changes in your life that may alter your investment plan?
From our perspective, every enigmatic shift in market sentiment underscores exactly why these sorts of questions remain our best defense and offense against the market’s quarterly, dime-changing whims.
As the fourth quarter unfolds and the holiday season approaches, we look forward to helping you maintain your all-weather portfolio through year-end, and beyond. How else can we free you to achieve that which brings meaning into your life?
Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.