By: Cameron MacKenzie
For most of the last 18 months, I have been deathly afraid of the stock market. In the precipitous drop from the heights of January of 2022 to August of that year, I lost a ton of money. I didn't expect it to happen, I couldn't understand why it was happening, and I didn't know what to do about it. Every day I watched the Nasdaq plunge, then rise just a little, then plunge again. I felt like I was in a bunker taking heavy fire, and I had to make a plan to fight my way out.
Every morning I sifted through financial newsletters and cross-checked for correlations. On the weekends I read whatever Barron's and the Wall Street Journal recommended. I rode my stationary bike listening to podcasts where financial advisors interview hedge fund managers. Finally, since I knew a recession was right around the corner, I made my move: I sold a bunch of stocks. This was, at the time, smart. Everybody I read and heard told me so. And now, six months on, it is clear that it was not.
First, do I feel like a sucker? Not exactly. I'm getting older, and I've been flying without a parachute for a little too long. I feel pretty good right now that I've got a solid chunk of money in something safe instead of riding the waves of tech. I have not tried to figure out how much upside I lost because I like to sleep at night. But more importantly, FOMO is not the lesson I want to take away from this episode. I don't want to think about how badly I misjudged the future, I want to remember how badly everyone involved in the financial ecosystem misjudged the future.
The recession has not arrived. Even though SBF is in jail. Even though crypto has crumbled, Robinhood dropped off a cliff, and the Reddit boards are quiet. The interest rate sits at 5.5%. Three major banks have failed. The yield curve–which I took the time to understand in depth–remains inverted. And yet, here we are, with the S&P up 10% in the last year and the NASDAQ up 13%.
That's not to say a recession won't happen. Goldman Sachs puts the chance of a recession in the next year at 20%. But they had the number at close to 40% not two months ago. I remember last summer when folks were forecasting a recession in early 2023. Lately, I haven't seen anyone forecasting a recession before 2024. And these are estimates by tuned-in, educated people whose entire job is to understand how the market works. This time they didn't.
Maybe I'm reading the wrong stuff, but the abject failure of the financial media-sphere to predict the market would rip up like it has for this long while avoiding a recession has given me a lot of pause. If so many people got it wrong, then what, exactly, am I reading? What am I listening to? And why am I spending so much time doing it?
Should we have bought gold to hedge against inflation? How about commodities? How about Japanese stocks? How about…Nvidia? The answer to that question would've surprised many people 18 months ago. It probably would've gotten you laughed out of the room.
I've decided to spend way less time reading financial news, and I'm limiting my podcast diet to self-help and deep-dives into bands from the mid-90s (the kids think DMB is cool again). I'm rethinking my relationship to financial media in total. It's not so much that they're dying to tell us what's going to happen in the market, it's that we're dying to know, and they're serving up answers. But I'm finding that the correlation between those answers and the real world is, how should I say this…unrelated.
I don't regret selling when I did and buying what I did. I thought it was whip-smart then and I think it's simply responsible now. It's a move that I should've made long ago. But that's a reflection of my life and my goals. Yours are, I would bet, quite different. And in all truth, that should be the only real guidepost to how and when to make your financial decisions. As I heard advisor Bill Berstein say the other day ON A PODCAST (I've really got to stop): the further you stay away from the media, the better off your pocketbook will be.
Opinions expressed here are those of the author and not necessarily those of SagePoint Financial, Inc.