And So It Goes
The short trading week gave investors in the stock market more to be thankful for, as the S&P 500 and Nasdaq both gained close to 1% on the week. And the 10-year Treasury yield stayed below 4.5%, closing the week around 4.47%, down from about 5% a month ago.
Since market indices peaked in late 2021 and early 2022, interest rates have risen dramatically, stocks have been volatile, and geopolitical events have put much of the world on edge. And yet, the S&P 500 is within just a few percent of the all-time high it reached on January 3, 2022.
We’ve spent plenty of time in this newsletter discussing the difficulty of prediction—especially in markets and macroeconomics—and each week and month continue to provide more examples of that difficulty. You think something might happen, it happens, and yet the market does the opposite of what you thought it would do when that thing that you thought might happen actually happens.
You get an expected thing here and there—and then a surprise. And then another surprise. And then another expected thing, or two, or three. And then another surprise, or two, or three.
And so it goes.
But sometimes you get real insight that leads to big profits. If you stay in the game long enough, keep searching, learning, thinking, and taking the wins and losses in stride without ever taking losses too big to take you out of the game, then you may eventually find yourself in a market full of bargains to buy right and sit tight.
“We don’t spend our time attempting to guess at the future direction of economies, rates and markets, things about which no one seems to know more than anyone else. Rather, we devote ourselves to specialized research in market niches which others find uninteresting, unseemly, overly complicated, beyond their competence or not worth the effort and risk. These are the inefficient markets in which it is possible to gain a ‘knowledge advantage’ through the expenditure of time and effort. They also happen to be markets in which micro factors relating to companies, assets and securities matter the most. This is where it’s possible to find bargains, and only bargain purchases can be counted on to dependably lead to returns which are above-average relative to the risk entailed.” —Howard Marks (“The Value of Predictions II, or Give That Man a Cigar”)
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