We often get the question, “What did the markets do today?” followed inevitably by, “Why?”
This is a great question to discuss with an acquaintance who moonlights as a day trader. They’re a market guru that can call the bottom of the cyclical market dip and peer into their crystal ball to predict future stock prices and reap the benefits to unfathomable wealth on a minute-by-minute basis. These people don’t exist in reality and would need as much luck as anything else to make this strategy work.
For the rest of us, we are stuck using the best research we can find and applying that to our investment philosophy. At VCP, we use Nobel prize-winning research to determine the mix of positions we hold in our portfolios for the long term. Long-term means we don’t change our philosophy, and we don’t chase trends, a practice all too common in our industry. What the research tells us is that small-cap and value stocks have higher returns over the long term than large-cap and growth stocks. Historically speaking, this is true. However, we all know that different companies, sectors, and industries perform differently under all different market conditions. This was not the case for the first half of 2024; admittedly, it is discouraging. However, as we look back into July, this trend did shift, and small-cap value outperformed large-cap for the month.
Turning into August and market volatility has been in the headlines recently. We have seen some big swings in the market in both directions. Unfortunately, the bad days get more press than the good days. Around the first weekend of August, we saw markets dropping 2-3% on several days. In the second week, there were several positive days where markets rebounded, but these did not receive nearly as much attention, leaving us with a negative feeling. It is an uneasy feeling when we see a few days when the market goes down a few percent at a time. When you zoom out of these few down days and look at equity returns year-to-date, they are still positive.
The moral of the story is to stay the course and not fixate on the sessions that are red. Markets will have good days and bad days, ups and downs. The important thing is not to panic in these moments and let time in the markets work FOR you. Many factors move stock prices. Interest rates, earnings, geo-political happenings, trade volumes, and more! Take a deep breath, look at the bigger picture, and realize that you have a plan in place that is working for long-term results.
Securities offered through Triad Advisors, LLC Member FINRA/SIPC. Advisory services offered through Vision Capital Partners, Inc. Vision Capital Partners, Inc. is not affiliated with Triad Advisors.
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