Usually, when equity markets decline it gathers momentum, as we have seen of late, to the delight of financial journalism, which seems to always want to harp on the negativity and never look for the positive.
The current market environment, as scary as it seems, is consistent with the later stages of a decline. At times like that, economic and financial fundamentals tend to matter less and less, and the decline begins feeding on itself.
Ultimately, the market has historically arrived at a point where more and more people panic simply because more and more people are panicking. It feels to me like we may be getting close to- if we’re not already in- that phase.
This is certainly not me predicting a bottom, either as to its timing or the level at which the decline might burn itself out. For what little this may be worth, however, it does feel to me as if we’re getting a lot closer to a bottom than to the previous top.
Having made the foregoing unscientific guesses, let me say yet again that any market outlook is irrelevant to our investment policy. We are long term-goal focused investors: the progression of our decision-making process remains goals-plan-portfolio. We’re guided in this by history, not headlines.
There are no facts about the future. We are never relieved of the obligation to practice rationality under uncertainty, and that’s what I’m always striving to do. I’m aided in this – as I hope you feel you are-by the conviction that huge public consensus regarding the capital markets is seldom very right for very long.
I would add only this: that in my experience stock prices tend to be more volatile than the fundamentals of the companies themselves. And that human nature is even more volatile than both. My view is that it’s human nature in all its tendencies to extreme pessimism near market bottoms and extreme euphoria near tops-that has grabbed the steering wheel here.
Be of good cheer, if you can. If you can’t, at least turn off the television. This too shall pass.