Yesterday’s hefty selling in the stock market may have shocked the perma bulls, but it should come as no surprise to strategic-minded investors. The writing has been on the wall for some time now, economically and financially speaking, as your editor has been pointing out for the better part of the past year.
The challenge, as always, is keeping the long term in focus without getting distracted by the day-to-day tactical issues that emit conflicting signals. Rest assured, much of the financial industry is dedicated to analyzing the here and now, leaving the strategic view up for grabs. If the majority of investors aren’t watching the broader trends, that’s partly human nature; it’s also a byproduct of the instant-gratification culture that’s become part and parcel of the 21st century finance.
But big-picture trends wait for no man. Even so, let’s no kid ourselves: identifying those trends amid the chaos of the daily noise is difficult and prone to error. That’s one reason why we always favor broad diversification across all the major asset classes. Yet we’re also inclined to tweak the weightings from time to time if the valuations enhance our conviction that the future is a bit less foggy in some respects than usual.