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My Tuesday Rant

It's Tuesday afternoon as I write this post. I have no idea what happened in the Melbourne Cup. I have not the faintest interest. The RBA hiked rates by 0.25% thanks to the price of fuel (see chart below), and WeWork files for bankruptcy in the US as it grappled with pricey leases it had signed before the COVID-19 pandemic and weak occupancy rates as hybrid working gained popularity.

It's Tuesday afternoon as I write this post. I have no idea what happened in the Melbourne Cup. I have not the faintest interest. The RBA hiked rates by 0.25% thanks to the price of fuel (see chart below), and WeWork files for bankruptcy in the US as it grappled with pricey leases it had signed before the COVID-19 pandemic and weak occupancy rates as hybrid working gained popularity.

We've been hearing about the "R" word (recession) for some time now. Pundits have been predicting it for a while now. I've always been scepitcal of forecasts. The ones that sh*t me the most are the ones that come out of the woodwork after the fact - give me a break! We all know a recession is going to hit, how is this news to anyone? A better question to answer then is, when will the recession hit, how long will it last, and how will stocks respond? I'll wait. Even if I had a crystal ball and I told you the answers to the first two questions, it would give you no insight into how to answer the third question - COVID recession is a case in point.


I mean, just take a look at the latest GDP print in the US. We just experienced the strongest economic recovery since the end of World War II and you're telling me a recession is imminent?

Last week we saw the S&P 500 gain 5.82%, which was the best week of the year and the best week for the major US benchmark since the week ending November 11th from last year. With geo-political tensions remaining hot, earnings looking not so hot, and interest rates surging, the prospects for equities looked dim. You couldn’t fault an investor for thinking that it may be a good time to lighten up and sit things out for a bit until things cool off and some of the uncertainty recedes. As the market tends to prove time and time again, though, just when things look their worst, the market has a way of going the other way. In addition, timing the market remains one of, if not, the most difficult aspects of investing. Without fail in the markets, the best weeks tend to come when they’re least expected.


The chart below shows the growth of $100 invested in the S&P 500 at the start of 2010 (dividends not included) on both a buy-and-hold strategy as well as if an investor missed out on the best week of each calendar year. The gap is enormous. While the original $100 is now worth $390.85, had you missed out on the best week of each year, you would have less than half of that amount at $193.55. In other words, well over half of the gains since 2010 can be attributed to those 14 weeks.

I wonder when pundits will just accept that the economy is strong right now. The constant chatter about what you think is supposed to happen or what should have happened, in the pursuit to look smart or fill some personal void. The stock market doesn't give a sh*t about what you think is supposed to happen. Saying "I don't know" is the easiest yet hardest thing to do. It's also the smartest thing to do.


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