Let’s go back in time. Why not?
It is the first day of January 2023 and you and I are discussing investment decisions for the year.
The good news is, we have a crystal ball that shows us almost everything that will happen during the year.
The bad news is, it doesn’t tell us how the stock market will perform.
We gaze into the magical orb, and this is what we see:
- Interest rates would increase.
- There would be political drama over who is the Republican Speaker of the House.
- The Russia-Ukraine war would continue.
- President Biden would have one of the worst approval ratings of his presidency by the end of the year, and Donald Trump would be leading in some polls to retake the presidency in 2024.
- Mortgage rates would hit around 8% nationally.
- There would be a threat of a government shutdown in the fourth quarter.
- Federal debt would now be 33 trillion.
- Hamas would massacre many innocents in Israel and take hostages; American warships would be sent to the Mediterranean, and a hot war in Gaza would be active going into the end of the year.
Be honest. What would have been your investment outlook?
If you are human, it probably wouldn’t have been too rosy.
If you had sold based on all that news or simply refrained from further investing, you would have missed a 40% rally in the Nasdaq, an over 22% upside in the S&P 500, and an over 12% gain on the Dow paired with a new record all-time high on Wednesday, December 13th.
This may hurt a ‘lil, but I think it’s appropriate to bring up a quote I heard this year:
“If you're the kind of person who has to be right all the time, you shouldn't be in investing.”
Or, maybe that’s the very reason you should be investing—to remind you that you are not right all the time.
I can assure you there will be a lot of news next year in 2024—some bad and some good. And you will probably mainly hear the bad news or potentially bad outcomes. After all, it is an election year.
Your favorite social media feeds and news networks will be happy to intoxicate you with as much reporting as you can consume.
The question is: how will it impact your investment decisions?
This year is a good reminder that the stock market indexes don’t always match the barrage of news headlines or the barometer of your feelings and opinions.
Quit guessing. Stop reacting. Know your risk tolerance, time horizon, and objectives and stick with an investment plan.
We don’t have a time machine or a crystal ball, but we are here to help.