The war between Israel and Iran appears to be over. The US is saying it is over and so is Iran....apparently. Hopefully that is correct and as I type this, after hours futures trading certainly implies that the news reports are correct.
The phrase don't just do something, stand there in an investment context is attributed to Jack Bogle. I talked about this a little bit yesterday and of course we have almost the exact same conversation anytime something bad for markets...or potentially bad anyway.
Military escalations certainly have the potential to be bad for markets but when the reactions have been negative, they have tended to snap back quickly which magnifies the mistake of selling this sort of headline. The duration of this one as a military events was pretty short and it didn't even move the needle for the equity market which when I posted on Sunday night was down about 30 basis points. Pretty much a shrug.
The above is a simulated result based on real data. Going back to 1962, 60% SPY/40% TLT compounded at 8.98% despite quite a few hideous drawdowns. I frequently say that plain vanilla 60/40 can get the job done provided there is an adequate savings rate. I don't believe this sort of 60/40 is optimal but it can be adequate.
This argues in favor of the Bogle quote. The more trading done against whatever allocation an investor believes is right for them the more they are fighting against whatever their long term CAGR will be. It is an argument to do less.
Looking at these type of charts and studying them offers great lessons about not panicking.
Amazon has endured plenty of brutal declines. Brutal. Despite how bad the drawdown chart looks, the stock has compounded at 31% since it started trading. Going forward, I have no idea what Amazon stock will do but it is pretty clear that none of us are likely to use our Amazon accounts less than we do, anytime soon. I am not making an argument to buy it, I am making an argument to not panic sell it the next time it cuts in half. It has almost 30 years of going up more than the broad market on the way up and going down more on the way down. Client exposure is through XLY which I first bought in November, 2008.
I mentioned this scene from A River Runs Through It recently. I also referenced it at fire training over the weekend. For anyone who is an investor, as opposed to some sort of trader, I would encourage less trading, trade less. Never trading is not realistic but less trading is. Trade less.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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