Own the Noise

Wednesday, March 15, 2017 |

There will always be some talking point with the potential to “tank the market”.  You can’t change or control that.  What you can change or control is how you react to the latest market tanking talking point.  Panic is the enemy of a savvy investor. 

Most of the time these talking points are noise (i.e. short-term disruptions that don’t change the underlying trend) and making a portfolio move based on these disruptions could impact your long-term financial goals (i.e. selling when the market is still trending up).  Here is a quick list of noise during the current bull market (off the top of my head, not all inclusive):

  • Debt ceiling
  • US Downgrade
  • Greece (more than once)
  • Europe recession
  • Russia invades (more than once)
  • China hard landing
  • Emerging Market currencies
  • Fiscal cliff
  • Terrorism (more than once)
  • China devalues
  • Oil falls
  • Election (more than once)
  • Seasonality (always)

I am sure I forgot a bunch.  But point being selling during any one of these could have had an adverse impact on your returns. 

Obviously at some point some event will spark the next bear market and selling may be prudent; however, in such a case focusing on intermediate-term indicators (valuations, earnings trends, market trends, economic fundamentals, etc.) and having a plan may beat reacting to market headlines.  And if you do have to “feed the beast” and react to headlines, do so in moderation (e.g. sell 10% not the whole portfolio) to help minimize any fallout.