Am I the only one to be worried?

How do you arrive at this conclusion?

2 Likes

They may follow the market.
But the market won’t necessarily follow the new world order and economy.

Investable markets don‘t necessarily reflect the world’s economy. Some of the biggest companies in the world aren’t exchange-listed. And some of them you can‘t properly invest in (think: China).

If the war ends tomorrow, we’d be likely to see a rebound in the market as some of the fears of the participants get dissipated. That scenario is probably priced in, but it may be priced at a low probability of occurrence.

Being priced in doesn’t mean the market is prescient and nothing will move if the expected scenario happens. At any time, the active market participants invest according to their expectations using all the information available to them. Some will have a more positive outlook, some a more negative one, you and I have our own outlook. At any given time, for those who don’t follow a strictly passive buy and hold strategy, we are pitted against all the other active participants who have placed their bets. At any given time, any new information could make the market move in a direction or another, depending on whether it fits the expectations of the most money invested or not.

By expecting to beat the market, you are expecting to beat the bets supporting the average amount of money invested. You may, but unless we are privy to undisclosed information or specific knowledge, the participants behind the biggest amounts of money have access to more information, more experience, more time and more computing power than we have.

Winning is possible, and we’ve seen some pretty strange and counter-intuitive market behaviors lately, but the odds are against us. We can win playing Blackjack too, but we’re more likely to loose and even more so the longer we stay at the table. For those who want to try their mettle at active investing during these times, don’t forget that the market will probably have rebounced quite a bit before things start to look better. By the time the right information reaches us, bigger sums of money will already have made their move.

7 Likes

You’re free to use whatever strategy you like. No one here can tell you whether it will work or not in the future. But there are studies of the past that generally conclude that there are no reliable signals to tell you when to move in and out of markets.

For some asset classes there are models to forecast the expected return going forward. But those are models, and they have wide confidence intervals, and may be wrong too.
There are strategies that shift towards assets where models forecast higher expected returns. The evidence, as far as I know, is not strong that this works.

Same goes for market-timing, there are no sensible models that would use various signals to successfully tell you when to shift in and out of stocks to outperform the do-nothing strategy. Sometimes you do, sometimes you don’t, on average you’re worse off. I’m sure people have tried to analyze using wars as a signal too.

I’d also challenge that you can actually make it a rules-based strategy. For example, would a war in Yemen or Syria count to shift out of stocks? Why not? There is some war going on somewhere pretty much all the time.
Instead you would act based on your gut feeling, likely when things are already going to shit. Maybe you make your trade in time before the others, or you do it late when everything is already priced in…

4 Likes

Don’t chase the trend! When “the next crisis” starts it’s too late to sell your stocks and buy gold.

Your portfolio is something really personal. Most mustachians will tell you to just buy 100% MSCI World low cost ETF and to just wait it out during crashes. They have their very valid arguments.

If you are a bit more paranoid like me you’ll have a maybe 50% allocation to equities, the rest goes into things you can touch like gold, real estate, commodities, cryptos and some cold hard cash. Maybe I have a little less performance during boom phases, but I sleep much better when things turn dark like they do right now and that’s important to me.

3 Likes

You can touch cryptos? Did I miss something? XD

3 Likes

yes, I can touch my hardware wallets :grin:

thats not really a sign of a healthy market tho.

2 Likes

It might also just be a false knee jerk reaction to “apparent progress” in peace talks between Russia and Ukraine.
Reading around that Russia is just buying time before regrouping, so not sure it is near over yet…
But I don’t know enough myself.

Market is a sentiment machine. :slight_smile:

Yes, I think they are just retreating from the north front to concentrate on their 1st priority: joining Crimea and Russia. They are still bombing civilians btw.

I was waiting for the next Ben Felix video and certainly I’m not the only one :nerd_face:. Sharing it here as it fits right into this thread.

The effect on bonds is quite interesting. Anyway, bonds already had bad prospects, especially if the expected interest rate hikes happen.

2 Likes