Beating a dead horse

We’ve all heard of the expression: beating a dead horse, haven’t we? It means to keep at something despite the unlikelihood of having any meaningful effect. The expression comes from 19th century England when a politician reportedly used the phrase — more specifically, he would have said flogging a dead horse — to express frustration at convincing people on issues of importance.

Well, at the risk of beating a dead horse, I want to discuss, yet again, the movement of the stock markets and how taking a step back is important when considering long-term investment decisions.

Not all is doom and gloom

When I last discussed this issue over a week ago, a summary was given of all the bad news surrounding the markets, which then carries over into other areas of the economy  — manufacturing, GDP growth, etc., — to paint a glum picture of the future.

And there was one glimmer of hope that suggested the overall outlook might not be that bad? What was it? The prospect of a continuing strong jobs market. And what happened after I wrote that brief analysis? An extremely strong U.S. jobs report came out and, you guessed it, stocks rebounded considerably. Here’s a screenshot of the headlines at the end of that day:

stock market fluctuations

And now here’s a stock chart of the Dow Jones Industrial average for the last month:

dow jones industrial average

Again, it’s the long-term that matters

As you can see, January 4th was the date of the upbeat jobs report released by the U.S. Labor Department, which was the exact day of that huge spike in stocks that you see; and the level of the stock index has kept getting higher, reaching levels seen prior to a very rough end of December.

So, again, what does all of this mean? The simple answer is nothing. Long-term investors should just ignore short-term stock-market fluctuations. However, given how much attention is given to the markets, it’s important to put them in perspective, even if it risks beating a horse to death over and over again.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


As the investment world turns

There has been no shortage of discussion on these pages about the short-term fluctuating nature of the financial markets, especially in the Trump era. Well, it’s happening again, only this time, well, take a look for yourself:

Now, much of the discussion here has been about how events usually get overblown and the market and economy keep growing. However, in this case, some of the negative sentiment appears to be somewhat more persistent than usual.

Another look at the numbers

Since October 3, the Dow Jones Industrial Average has gone from a high of almost 27,000 to a current level of about 24,600, which is a drop of about 8.2%.

So, things are looking pretty bad, right?

Maybe not so much.

First, let’s take a look at the three month chart. If you notice, even though the last two months have seen some precipitous drops in the Dow average, they have also been accompanied by some steep rises, too.

Now, let’s take a look at the one-year chart. Notice something? There’s been a consistent up and down to the stock market all year. This is not new.

Let’s take a look at the three-year chart. Guess what? All the fluctuations we’ve been seeing in the last two months, and even the last year, come at the tail end of three years of growth. So, even with all the recent turbulence, we’re still way ahead of where we were at the beginning of this ride, aren’t we.

Fluctuations come and go

Finally, let’s look at today’s chart as I’m writing this. Despite the headline you see above, current trading is much higher than opening trading, even though a huge dip occurred near noon, and then bounced right back.


So, the lesson? Again, it’s about taking a deep breath and looking at long-term trends. Traders are currently panicking because they’re unsure about Trump’s “truce” with China and because conventional wisdom says a recession has to come at some point.

But, here’s the thing. We don’t know when. Nobody does. And, in the meantime, short-term fluctuations shouldn’t distract investors from long-term fundamentals that deliver capital growth over time.

UPDATE: Here’s the same one-day trading chart, except after closing. The index closed well up from opening trading, and only slightly down from the previous day’s closing level. Thus, proving, once again, that when the market goes down, it goes back up again. Drudge had to change his headline a few times this afternoon.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

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