TrendCalc Market Insights
Friday, the S&P500 was once again down (-0.18%). In spite of that being the fourth down day in a row, the S&P500 was only -0.68% for the week, bringing the YTD to +4.24% YTD. Sectors and asset classes were mixed but mostly positive, led by banking, semiconductors, and energy sectors.
All TrendCalc’s models advanced, most notably our Wealth Creation models. These TrendCalc models continue to hold a performance gap over buy-and-hold portfolios and various benchmark indexes. F1D1 and TC TINS are our top year-to-date performers with returns of +8.11% and +8.87% respectively. 50 days into the year doesn’t prove anything, but we are pleased in our process producing successful returns vs benchmark indexes and Conventional Wisdom’s passive BaH (buy-and-hold) average-averaging.
Our macro concerns:
- Fed (and other central banks) action and manipulation
- Government leadership and decision-making in battling COVID
- Growing probability of increasing inflation from macro concerns 1 & 2
Anything worthwhile in life tends to have some form of high cost attached to it. This is especially true when it comes to money and creating wealth. High returns entail risks of being wrong and losing money. And losing money when investing can be very emotional, especially when you don’t have the necessary knowledge, understanding, and experience in how investment markets truly work and making competent buy-hold-sell decisions.
We all strive to be correct in our decisions, or said another way, we don’t want to make mistakes and/or risk being wrong in our thinking. As such we all tend to surround ourselves with people who generally agree with us and tend to believe in a majority opinion. After all, our country is a democracy where a lot of “opinion” gets settled by majority vote of participants. This is a strong social proof, after all, if most people feel something is true, and behave as such, then it must be. This is the strength of narratives, where the more people that agree on something make it “proof” of being right. Narratives tend to morph a majority opinion into a “verified” fact or some form of scientific exactness. When you can agree with a majority opinion, it helps increase your confidence that you are doing something right.
But there can be serious problems with viewing the crowd’s majority opinion as evidence of accuracy. This is true in politics, regardless of your political preferences or affiliation. It is even more true when it comes to sound investment decision-making where great success is rarely, if ever, found in the popular Conventional Wisdom of the day. Don’t confuse popularity of any narrative as fact and the right course of action, especially when it comes to being a great success as an investor and creating wealth.
If you or your source of financial advice don’t understand what it really takes to be a great investor and how to truly create wealth (like a 1%er, 5%er or whatever you want to label the best of the best), then maybe it is time you talk to a true market professional who knows the difference between the conventional wisdom (marketing to the masses) and the buy-hold-sell decision-making actions of great investing and investors.
Philip S. Hammond, CFP®
Managing Director/Chief Portfolio Strategist
This material is not a recommendation to buy, sell, hold, or roll over any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition or particular needs of any specific person. Investors should discuss their specific situation with their financial professional.
Except where otherwise indicated, the views and opinions expressed are those of TrendCalc as of the date noted, are subject to change at any time and may not come to pass.
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