Normal
The meaning of the word “normal” is best described as something that is common, usual, or expected. The problem with this description is that my version of “normal” may be very different than yours and yours very different from someone else’s. What is considered normal to one person may be uncomfortable to another.
The stock market is going through what the financial experts describe as a “normal” correction, yet very uncomfortable to many investors who feel that “this time is different.” Similar to a pilot flying through turbulence, an educated investor understands the regularity of these short-term corrections through a business cycle and does not let them change their course of direction. Both the experienced pilot and investor will safely get to their destination if they trust the process and expected outcome.
As an avid reader of financial history and stock market outcomes, I thought the team at the High Net Worth Advisory Group should share a chart we all have on our desks to remind us that corrections throughout a business cycle and 200 years of political theater are “normal” and that they happen more often than anyone would even think. Great investment returns are made over time and the cost of admission to achieving these strong returns is understanding and taking advantage of the volatility as markets adjust. It is often said but at no point guaranteed that the stock market typically takes one step back to take two steps forward. The key to investment success is knowing that no one is able to predict the step back and if they guess that part right (and I do mean GUESS) they never seem to get back in the market in time to take advantage of the two steps forward. Subpar returns are the trademark and byproduct of the active trader. Short term traders are planting beans.
I have often written that the politicians may control the direction of the capital markets over a very short period of time, but then the corporations of America and the brilliant people who run them figure out a way to deliver value for their shareholders through higher earnings and stock prices. Stocks are not trading vehicles, but a way to invest in the greatest businesses in the world and share in the profits that they generate. You have heard me say many times, “Are we planting a bean, a bush or a tree?” The way we look at portfolios at the High Net Worth Advisory Group is to plant a tree. Watch it grow over time, prune when and only if necessary and make sure that it stands strong enough to weather the storms of the day and can be enjoyed for many years to come.
As these letters seem to bring many thoughts and comments, I encourage each of you to let us know if this one brought up anything you want to discuss. Until then, enjoy the view of your tree which will stand strong against the winds of the day!