HBTM: 12-19-2016

How ‘Bout That Market?  This is a question I hear at social gatherings often enough that it makes sense to make it a regular entry on this website.

The Market

The Federal Reserve raised rates last week, but everyone expected that so the announcement was received with an initial shrug of the shoulders.  As more people read into the Fed’s statement, they noticed the Fed expects to raise rates three times in 2017.  This caused the market to drop by less than a percent?  Maybe?  Speculating about the market’s daily moves just isn’t my thing and if it’s your thing, then I think you should get a different thing.

Focusing on the daily noise makes it easy to neglect the long-term and that’s dangerous for any investor.  Also, millions of actions influence the markets every day.  It’s silly to point at one thing and say, yep, that’s why the market did what it did today.  There is a big event or two that comes along every couple of years where that is actually the case, but trying to find a cause and effect on a daily basis is not helpful.

The funny thing is that the Fed has a history of being more bark than bite.  We were supposed to get two or three rate hikes this year, too.  Instead we got one at the last minute.  Interesting.  Not much actionable information to be derived from that nugget except maybe don’t buy the hype that rate hikes will destroy your portfolio and kick your dog.  Everyone’s been preparing for higher rates for the last 5+ years.  I wouldn’t be surprised to see a muted response to future hikes.

Do You Think It’ll Keep Going Up?

I think the stock market will be higher ten years from now, yes.  I do not know what path it will take to get there, but I know it will not be straight up.

The Disclaimer

Nobody knows nothin’.  The above is speculative bullshit.  If I had an inkling of what the market was about to do, I’d be on a beach in Antigua counting my money.  The same goes for your ‘stock guy’ and that dope on TV with the ponytail.  They don’t know what the market will do in the next week, month, year, or even the next 10 minutes.  They don’t even know why the market did what it did yesterday, last month, or last year, but that does not stop them from backfilling a narrative to explain an irrational, open system (as opposed to a textbook world of rational actors where all else is equal).  We humans seek these explanations out to find patterns in an effort to guide our future actions and justify past mistakes.

So why read this at all?  In my experience, 60% of people who raise the topic of investing in a social setting are seeking your approval.  30% are trying to establish themselves as an investing authority so they can sell you something.  The other 10% are genuinely interested in this stuff.  Ideally, this post helps you keep up your end of the conversation.  More importantly, I hope it helps you spot why the discussion turned to investing in the first place.