Temperament is what makes a good long-term investor

The stock market continues to confound the “experts” and confuse the novices.  One of our favorite Warren Buffett quotes is, “the most important quality for an investor is temperament, not intellect.”  If you had been listening to the investment news programs at the beginning of the year you would have heard the clarion call for panic and retreat.  The bull market was over, and the end was near.  Buy gold.  Buy commercial real estate.  Buy cash. Whatever you do, get out of stocks.

The market recovered all its losses from the end of last year and has just finished one of the best quarters in a decade.  Thankfully we didn’t panic even though it seemed like the only smart thing to do at the time.  So where do we go from here?

According to Goldman Sachs, the US bull market just hit its 10-year anniversary and is now the longest bull market in history.  Another old Wall Street truism is that bull markets don’t die of old age, they get murdered by the Federal Reserve.  Last year the Federal Reserve turned in its semi-automatic weapon for a squirt gun and has halted its string of increasing interest rates.  Not only that, they have turned very dovish (which means they are not likely to raise rates anytime soon).  This is generally a good thing for the stock market, because the Fed most likely hasn’t raised rates enough to kill it.

Oil shocks could also create havoc in the economy and the stock market, however a dramatic rise in oil prices probably isn’t in the cards over the short-term especially as US oil production continues to grow.

Currently, there does not appear to be any excesses or bubbles in the financial markets either, at least not big enough to cause a recession. 

Of course, humans could potentially mess everything up.  The British are creating a large dose of uncertainty around Brexit (there are some people even calling for another referendum).  It is anyone’s guess what the endgame is for Brexit, but a quick decision seems unlikely.  US-Chinese trade relations are on and off and they have certainly put a damper on global growth and animal spirits as few companies will make large commitments until the trade war is over.  At least the US government isn’t shut down (not at the moment anyway).

Please review your statement and contact us if you have any questions.  Our goal is to create portfolios to help you reach your goals within a parameter of risk that is comfortable for you.  It is easier to be an investor of good temperament when you are comfortable with the amount of risk you are taking.

As always, we remain balanced and diversified with our focus on the long-term.

The Bond&Devick Team