Current Events Show Difficulty of Predicting Market Movement
Investors are regularly warned that trying to time the market by picking the next hot stock and dumping other stocks before they tank almost never works. Peter Lynch, manager of the Magellan Fund at Fidelity Investments from 1977 to 1990 famously said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”
There are several reasons for this, but one of the main ones is that a wide variety of factors go into what drives the economy, and therefore stock prices. Some factors are economic in nature, such as inflation, employment, interest rates, etc. Others are not strictly financial, but they can have a major impact on the markets. Recent headlines have provided several examples, including:
International unrest such as we are seeing in the Mideast after the Hamas attack on Israel and the Israeli response. Escalation there increases the chances of additional military action in the region, including action involving other nations, and it is likely to cause disruptions in the flow of oil.
Labor problems, which affect both companies and striking workers, who are also consumers. The United Auto Workers went on strike Sept. 15 when the union could not reach a contract agreement with General Motors, Ford and Stellantis. General Motors said the first two weeks of the strike had cost it $200 million in losses.
Politics, which can affect markets by making companies and investors nervous about the future direction of the nation. Former President Donald Trump is facing 91 felony counts in four criminal cases. He is also the current prohibitive favorite for the 2024 GOP presidential nomination. And after weeks of failing to pass a budget to avoid a government shutdown, the House and Senate narrowly passed a resolution to fund the government through Nov. 17. However, Republicans removed House Speaker Kevin McCarthy on Oct. 3 and so far have been unable to agree on a replacement. This leaves the House incapable of conducting business – including funding the government.
Events like these – many of which were not predictable or expected by investors – happen all the time. Even investment managers, whose job it is to be aware of events that could affect the markets, sometimes get caught unawares. How can regular investors cope?
At Peachtree Investment Partners, we believe in finding an investment approach that fits your situation and sticking with it. In general, we focus on the stocks of large, established American companies that have strong positions in their industries, established and experienced leadership, consistently good return on investment and a long history of revenue and earnings growth.
We also believe strongly in stocks that pay dividends. Dividends provide a shield against market volatility by ensuring that not all your return comes from an increase in the stock price. Reinvesting your dividends also can help to grow your portfolio significantly over time.
Of course, there are no guarantees in investing. But our experience has shown us that this approach can help maximize long-term returns and minimize volatility – and stress.
We are happy to talk to you at any time about your portfolio or any other financial concerns you may have.
Garry K. Schaefer
Courtney S. Deveau
October 25, 2023
Peachtree Investment Quarterly may offer general financial, insurance, tax and business ideas. However, due to the ever-changing tax laws as well as the complexity of the financial industry, you should seek professional advice before implementing any of the ideas contained in this newsletter. Peachtree Investment Partners, LLC assumes no liability whatsoever in connection with the use of this newsletter. Copyright (C) 2023 Peachtree Investment Partners, LLC. All rights reserved.
