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.


Sorting through economic forecasts

(Feature image: Confusion by Procsilas Moscas under Creative Commons license. )

If there is a running theme on these pages, it’s that investors and economic observers should try to filter a lot of the skepticism prevalent in the financial press. At the risk of beating a dead horse, this theme should be emphasized over and over again, for a number of reasons.

First, there’s the nature of the press itself, as well as that of economic observers. In many ways, it’s in their nature to look for bad news when good news is the order of the day. If you don’t think that’s true, then I suggest you look at the endless predictions over the last decade of a bursting of the bubble in Canada’s housing and construction sectors. It has yet to happen, despite many predictions to the contrary.

Learn to develop a filter

As a result, when scanning the current global economic analysis, a similar filter should be used. It’s not just that industry observers look for bad things when good things are happening, it’s that circumstances present themselves that are in some ways unprecedented. For example, is a prolonged boom in the housing sector of this nature the norm in Canada historically? Not really. So, it’s understandable that, using traditional analysis, many would expect one to happen, even though it hasn’t.

Which highlights a very important lesson for investors and economic observers: All circumstances are different. Just because something has happened in the past, it doesn’t mean that it will happen in the future. Alternatively, just because a set of circumstances are new, or unique, it doesn’t mean bad things are about to happen. The world has a way of adjusting to adversity, and recent events are proving this axiom accurate.

The sky isn’t always falling

Specifically, there is no shortage of economic and investment analysis that suggests trouble is on the horizon. However, this is in large part the result of circumstances that really haven’t occurred in the past. Namely, there is a president of the world’s largest economy who is upsetting the world order in many ways, and many observers are still adjusting to this new reality.

Therefore, when you have President Trump starting trade wars, renegotiating trade deals, engaging in unprecedented tax cuts, much of the investment and economic world doesn’t know how to react. But, again, it shouldn’t be a cause for panic. The red-hot American economy is still showing no signs of slowing down, and these trade spats have a way of resolving themselves. Just look at what happened with Nafta.

So, if there is some advice in all this, it’s to look at all the current forecasts with a filter. Don’t take everything at face value. The sky isn’t falling. There is always opportunity out there, even if people are extremely reluctant to see it, or even accept it’s possibility.

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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