By Miles Clyne
SIA Wealth’s (technical software we use) daily update this morning pretty much summed up the pain all investors have been feeling going into Christmas. “Yesterday was a particularly brutal day for world markets as a number of significant support levels failed to hold against a tsunami of selling. The combination of tax loss selling, record shattering mutual fund redemptions (it turns out that not only was the big $46.2B one week outflow reported by Lipper and mentioned in yesterday’s Morning Minutes a record, it was more than double the previous record), plus fear and uncertainty over what impact political tensions could have on economies and resource demand around the world, combined with the upcoming holiday slowdown has created a perfect storm for world markets, encouraging investors to move to cash or defensive havens.”
A very bad day in a string of bad days over the past two years isn’t making the holiday season very merry for investors. The upheaval driven by President Trump, add in Brexit, energy issues and China, it’s easy to see why uncertainty is clouding the near future.
What to do? We know what a lot of people are doing, trampling each other on the way out the door. We still have one foot in and one foot out. In October, we let our investors know we were in the cautious phase in the markets, where we had begun building cash. We’ve written a number of articles highlighting how the Fall can be a rough time of year. For some reason, we wrote more on it this year than past years, maybe deep down we felt something was more amiss this year.
Our technical process has kept us relatively safe for some time. Relative being a word that I both love and hate. It can feel like a CYB (cover your behind) word at times. At other times it speaks the truth, compared to what you could be doing if you owned another investment.
Do you follow the herd, or do you follow a discipline? Time for the relative word again. The discipline we follow with dedicated conviction can keep us in the markets and also get us the heck out of the markets. There are trigger events that have to happen in either case. And the trigger events can happen slowly or quickly. We let our clients know in October the first trigger was pulled, which told us not to rebuy when we make a sell, thus building cash.
If you think you should follow the herd, I refer you to our blog on Peter Lynch, how most investors lost money with Mr. Lynch over a period where he was the world’s top performing fund manager for greater than a decade. Mr. Lynch had a discipline, many investors did not. So, I ask again, what do you choose?
The more difficult a decision is, likely the more important the decision. And tragically, the right decision is often the more difficult of the choices. We want the pain to stop, but it is our ability to deal with the pain and struggle that defines and strengthens us in order to be better and happier.
Maybe this is Santa’s gift in lieu of returns in the market? Teaching us to take ownership of our right to choose, and make ourselves better because we do what is right, not what is easy.
All the best over the holiday season to you.