I came across this chart and thought it was particularly timely to show to my clients. It puts into perspective the volatility of the markets. It is a good reminder for us, as investors, that volatility is a normal part of investing. We sometimes forget that when there are long periods of low volatility. However looking at the accompanying chart, it is really rather illuminating.
Since it looks like the tariffs on China are going to be with us for a while longer, I thought it would be prudent to take a look at how this may affect GDP (gross domestic product) going forward as this is an important determinant in stock market prices. I came across the chart below that shows the projected GDP reduction from tariffs based on LPL Financial GDP growth projections.
I am often asked: what do you think the market is going to do the rest of the year, no matter what the year. My answer: I have an opinion but I don’t know for sure nor does anybody else. Don’t take my word for it, as Warren Buffett has been quoted as saying:
“I have never met a man that can forecast the market”
It certainly is evident to me that we are most likely in, and will continue to be in, a period of rising interest rates for the foreseeable future. I think it is very informative to see how stocks have performed in a rising interest environment. Conventional wisdom says that rising interest rates are not good for the market and I would tend to agree.
So far this year, earnings growth for the S&P 500 has been quite outstanding. We are looking at 20% + at least, for the first half of the year. It would be nice if this type of growth could continue infinitum. However, intellectually we know, that type of growth cannot continue forever. It is quite possible that we could be nearing peak earnings growth but not necessarily peak earnings.
I came across this chart that I thought I would share. It is nothing I didn’t know, but seeing it on paper is rather really illuminating. Sure, putting your money in Treasuries seems safe from a credit stand point, but there is a cost with today’s rates so low.
I came across the charts below and thought it would make a good discussion on the whole Risk vs. Return argument.
The bottom line is that while in any one year returns of asset classes are random, the corresponding risk of any particular asset class is more predictable. If you study the charts you can surmise that the most potential returns can also be the most risky.
I thought I would revisit a golden oldie from my blog post past because I feel it is more important than ever. It’s the question I am most often asked.
What is the most important quality you need to have to be a successful investor?
The answer? Patience.