Saturday, December 9, 2023

Being Smart with $$ - The Markets Already Price In What We Know

 


The stock market does an amazing job of quickly processing all the information available to us and fairly pricing assets each second. It is incredibly hard to find assets to buy that are cheap and sell assets that are expensive and profit by it. This is proven by the fact that the vast majority of actively-managed mutual funds underperform their benchmarks over long periods of time.  Stocks generally go up over the long run although you never know which days or months will give us strong returns. Research tells us that in order to succeed in the stock market, you need to sit tight so you are in it when the upward moves happen.  At the beginning of this year, we were told by most market analysts and business channel pundits that a recession was obviously coming and we should reduce our position in stocks. What they didn’t discuss is that the markets were already pricing in the expectation of a recession, and that prices were already lower than they would be if we believed a booming economy were coming. Well, guess what. All of those analysts and pundits were wrong and the economy never contracted in the way they predicted and the US stock market is now up around 20% for the year. Listening to the so-called experts would have cost you quite a bit of money by being out of the market. It is worth repeating that the markets always reflect what we already know so your actions to buy or sell will never get ahead of the existing data.  There are never any guarantees in the stock market, but someone with a long-term perspective will be best suited by ignoring the short-term expert advice, as proven by another year where the pros got it completely wrong. (Past performance may not be an indicator of what to expect in the future and your individual circumstances should be considered in any investment decision.)

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com

Hourly, Fee-Only Financial Planning and Advice.

No Commissions.  No automatic, annual fees.


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