A colleague mentioned the other day that investing in the current stock and bond markets felt a bit like being in purgatory. And you know what? It does seem a little like purgatory, where souls are believed to await their final fate.
Just as purgatory is often depicted as a place of reflection and penance, investors in a challenging market environment undergo emotional turmoil. Seeing investments not yielding expected returns, or being stuck in positions with no clear exit strategy, can be mentally exhausting.
Admittedly, comparing anything to purgatory is not my preferred analogy, but I see his point.
After a smallish rally earlier this year, the stock market has turned down about 8% over just the last two months leaving us with a tiny sliver of profit so far this year and it seems like nothing is happening now, nor will it anytime soon.
And the bond market? Fuhgeddaboudit.
But here’s my preferred analogy:
Imagine that you and I are in a sailboat together. She’s a beaut’; sleek, polished, and built from years of study and analysis of the science of sailing.
We’ve launched her and we’re all together in the boat. We’ve got the sails trimmed, the keel is at just the right depth, and the rudder’s set in exactly the right direction.
But, there’s no wind. And we can’t make it windy either. We’re just stuck staring at each other, waiting for something to happen.
So maybe we try to jiggle things about by changing the configuration of the boat and trying some other different things.
But that’s not the problem. The problem is the wind, or more accurately the lack of it. No amount of adjusting on our boat is going to make the wind blow.
The risk is that during our jiggling and retrimming, the wind starts to blow and we find ourselves out of position and unable to take advantage of our newfound wind. Or worse yet, we’re so out of position a strong gust capsizes us.
Better just to wait in the calm, staring at each other, knowing the wind will blow again someday.
It always does.
~ Jeff
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