The Advantage of Perspective
“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” Peter Lynch
Well, September delivered just as it was described in late summer, with “The worst monthly result since March 2020,” according to the financial news channels.
All sorts of terrible headlines will follow.
Investor fear is back. Over ¾’s of the audience does NOT like the stock market, and cash is overtaking the system. And it’s only the first down month since January.
This is great news for long-term investors.
That the red arrow at the top? This was when we were just 5% off record highs. Talk about deep-seeded! And our hunch is that it won’t burn off for a very, very long time.
Now have a look at the red arrow along the bottom. There is VERY little activity below that red line. In fact, only two periods align with where we are now: Late 2018 during the dreaded China Tariff War; and March of 2020 at the start of the Global Pandemic Shutdown.
Do we really think our current state of affairs is as bad as those two periods of time? Right now in America there are:
- Record Margins
- Record Cash Flows
- Record Household Net Worth
- The lowest debt levels and costs to asset ratios since 1979
- Record Corporate earnings
- Record Corporate Cash on balance sheets
- Record consumer cash levels – over $21 Trillion now for the rainy decade fund
The opportunity hidden in all this confusion is substantial.
Nothing like this has ever unfolded in this data.
Were you to show anyone (with a record in the investing world) the current sentiment data and the length of time it has persisted they would guess that we are in a long-standing bear market.
But we aren’t.
We are 5% off record highs.
The investor audience has the memory of goldfish.
But with a simple twist of the prism through which we perceive the horizon ahead an entirely new paradigm jumps out at you.