So, who do you believe?Submitted by Cameron Woods Portfolio Management on December 7th, 2017
December 7th, 2017
By: Jeff Woods
A persistent dilemma for investors is choosing who to believe. There's no shortage of experts prognosticating their views with resounding certainty.
Last week we read a very persuasive report suggesting that the nine year "liquidity driven bull market" in stocks and real estate will soon be coming to a close ("soon" being within 1 - 5 years). The consequences, when this happens, will be "cataclysmic".
Within days of reading this article we met with a very well respected mutual fund manager and listened to his outlook for the markets. "Tax reform in the US will drive earnings materially higher." he says. "Earnings are still growing and global growth is accelerating. Stocks are still a better value than bonds and there is still room for earnings multiples to expand." He presented a very logical, rational case as to why the stock markets should continue to move higher and why there is no need for concern.
So who do you believe and what should you do about it?
We'd bet that most people will agree with the viewpoint that confirms their existing beliefs (aka Confirmation Bias).
So who do we believe and what are we going to do about it?
We're agnostic. Sure, we have our opinions on what the future holds, but experience has taught us to squash those feelings when it comes to making investment decisions. Belief in a particular market outlook can be dangerous to your long term financial health.
"It's not what you don't know that kills you. It's what you know for sure that ain't true." - Mark Twain
Instead of trying to predict the future, measure current market conditions and assess your odds of success. As long as the trend is your friend stay the course. When it changes, so should you - but no sooner.
And, of course, make every year count!