Tantrums – What Markets and Toddlers Have in Common
What a ride we’ve been on so far in the month of August. To start, we went through three consecutive days of nastiness in markets as investors digested:
- A softer-than-expected jobs report (yet still positive, in excess of 100,000 new jobs);
- Rising interest rates in Japan (and the spike in Google searches referencing the “carry trade”); and,
- A sell-off in Tech Stocks that had folks wondering if the AI-party is over (readers of this digest know we don’t dignify those kinds of predictions).
We appreciated this sage perspective from a WSJ article we saw in the midst of the recent downswing:
“As a guideline, sudden market selloffs are less dangerous than those that unfold progressively over time. This is because investors who rationally price in bad economic data often do so slowly, as it trickles in. Flash crashes, conversely, are often a sign that some tidbit of bad news made speculative bets go awry, triggering a cascade of trades, many of them automated.”
So, just as you might do with a toddler throwing a fit for any given reason, we thought taking a breath and keeping cool made sense (notwithstanding whatever the dog days of summer have been serving up in your area). Tantrums of any sort (be they toddler or trade driven) are best weathered with a measured approach.
And by “measured approach,” we mean that we stayed on top of the situation (as always) and our financial planners practiced our policies and executed our protocols by reviewing our Clients’ accounts for opportunities to capitalize on any rebalancing needs presented by said market movements (at a minimum, we’re looking every two weeks, and in more volatile times we ratchet that cadence up).
We saw inflation hit its lowest point in years (2.9%!) and retail sales and overall economic growth projections surprise investors on the high end. And, the Sahm Rule-driven recession predictions have suddenly dried up and given way to optimistic views about the economy and excitement about a seemingly imminent interest rate cut.
And, through August 15, markets have found all that was “lost” in the early part of the month.
See-saw, indeed.
Also, to be clear: we’re not making a call on a recession either way. We’re just making note of (and poking a bit of fun at) how quickly temperaments can be riled up and dialed down.
Onward and upward!
The Yeske Buie Team