S&P 5000
On February 9th, 2024 the S&P 500[i] managed to notch a new record, closing over 5,000 for the first time[ii]. The major average representing 500 leading U.S. Publicly traded companies managed to continue the momentum of an especially strong 4th quarter of 2023 to start off this election year with a series of new highs.
Is this the elusive soft landing[iii]? Has a recession been avoided?
That remains to be seen.
Remember: if you can’t see the forest for the trees, it’s impossible to know if you’re out of the woods yet.
If the last few years have taught us anything, they have served as a reminder that in the short-term the market is anything but predictable, but over longer periods of time it has a tended to go up.
Does hitting 5,000 mean anything? Yes and no. Big round numbers like this have a kind of placebo effect, the expectation itself may be driving the response. Additionally, technical or rules-based traders and the options market could increase short term volatility, which is another way of saying that focusing on the numbers in the moment is failing to see the forest for the trees.
Individual companies may fail, but the global economy tends to grow stronger and more resilient over time. Investors have historically been rewarded for being willing to accept volatility, but that’s easier said than done, especially when things get volatile.
Past performance is no guarantee of future results, and investments involve risk including the loss of principal. However, historically trying to time the market has been a gamble but long-term participation in it has gotten rewarded.
Long-term investing success for most comes from patience. The games to be played trying to profit in the ultrashort term may be exciting, but that level of uncertainty is too much for most to handle and likely unnecessary with proper planning.
We believe that there needs to be a comfortable margin for error when it comes to a plan, and any plan relying on making money day trading has razor thin margins.
You want more resiliency as time goes on, ideally decreasing the likelihood of ruin, if you’re depending on what happens in the short-term you are always at the whims of the unpredictable.
Uncertainty will always remain, accepting this and having it incorporated into your plan is the only way to build true resilience.
Photo by Israel Piña on Unsplash
