Signs point to continued growth

“…the angle and speed of the market’s ascent…make it resemble most closely the powerful moves off decisive and sanctified market bottoms of yore, ones that kicked off long bull markets and signaled enduring economic revivals.”

– CNBC senior markets commentator Michael Santoli, in an 8/15/20 article. For those who worry that the market’s rally may have run its course, he wrote, “investors shouldn’t dismiss the chance that it’s not so late in the grand scheme.” Read more at cnb.cx/32s1QAa.

Or not

“Never before have I seen a market so highly valued in the face of overwhelming uncertainty.”

– James Montier, a member of the investment committee for GMO, writing on the company’s blog on 8/12/20. He sees a dangerous mix of overoptimism and overconfidence among today’s investors. Read more at bit.ly/3l179io.

The high cost of indecision

“Even if you believe the probability of a correction is high, it’s far from certain. And when the correction doesn’t happen, the expected opportunity cost of having waited is much greater than the expected benefit.”

– Larry Swedroe, chief research officer at Buckingham Strategic Wealth, in an 8/21/20 Evidence-Based Investor blog post. He said more money is lost anticipating corrections than in them. Read more at bit.ly/3gsb4kJ.

Emotional momentum

“You may have decades of investment experience, but not all of those years are weighted equally. The more recent the fear, the more skewed the appraisal of risk and reward.”

– Behavioral psychologist Daniel Crosby, in an 8/11/20 Kiplinger article about the danger of recency bias — the tendency to be overly influenced by recent events, such as the COVID-19 pandemic. Read more at bit.ly/3j8wDZk.

Are we there yet?

“We have a long way to go and we aren’t getting there very fast.”

– Mark Zandi, chief economist for Moody’s Analytics. Moody’s helped create a “Back-to-Normal Index,” which shows which states are closest to and furthest from their pre-pandemic economies. Overall, the index showed the U.S. economy was operating at about 78% of normal as of August 19. Read more and see where your state stands at cnn.it/32jlIp2.

The Dow gets a makeover

“It shows you how the giants can fall.”

– Wharton finance professor Jeremy Siegel, commenting to CNBC on 8/25/20 about the decision to replace Exxon, Pfizer, and Raytheon with Salesforce, Amgen, and Honeywell in the Dow Jones Industrial Average. Exxon (formerly Standard Oil), a Dow component for nearly 100 years, has seen its market capitalization plunge nearly 50% since April 2019. Read more at cnb.cx/2QkPGTS.

How low can they go?

“The reality of money-market funds is it’s no longer about return on capital. You’re not going to make any money until the Fed raises rates.”

– Keith Berlin, head of fixed income at consulting company Fund Evaluation Group, quoted in an 8/24/20 Wall Street Journal article. Low interest rates have prompted many money market funds to cut investor fees to avoid having yields fall below 0%. Read Seeking Alpha’s summary at bit.ly/3aUUBnT.

Objectivity takes a holiday

“What gnawed at [Sir Isaac] Newton for years, and what still seems strange, is that his capacity for dispassionate analysis failed him when he needed it most. Here was a man who had calculated logarithms to 50 places. But in the thrill of the moment, he failed to do the math.” 

– Thomas Levenson, in an excerpt from his newly released book, Money for Nothing, which ran on 8/23/20 in The Atlantic.

Levenson said Newton let emotion govern his investment in the South Sea Company, which led to catastrophic losses — a phenomenon still common among investors today. Newton lost the equivalent of nearly 2 million pounds in today’s money ($2.6 million in U.S. dollars). Read more at bit.ly/3gpgOMe.