26 Jan 2023 The Intersection of Market Narratives and Personal Responses
The Beacon office is located within the heart of Five Points neighborhood in Raleigh, appropriately named after the five-pointed intersection of Glenwood Avenue and neighborhood roads. That intersection is known for having confusing traffic patterns, speeding cars, distracted pedestrians, and unfortunately, many accidents. You need different approaches to navigate through the intersection whether you are driving or walking, and your strategy may change depending on which direction you are headed and what time of day it is. Drivers are eager to speed through the intersection and emotional when unpleasant (yet semi-predictable) surprises occur. Just this morning, I put on my blinker to turn into Beacon and in my rearview mirror, I could see the person driving behind me exclaim, “Are you kidding me??” and desperately try to move into the left lane, to no avail.
When you learn to drive, you hopefully learn to limit distractions while you drive so you can pay attention to your surroundings. Our cell phones have driving mode settings so we can eliminate the constant text pings or phone calls, or contain them to the car audio system. Technology is always evolving to assist us. In the narrow laned section of Glenwood Ave in Five Points, I am very grateful for features like blind spot monitoring that give extra reassurance that I’ll make it safely through the intersection.
We are surrounded by distractions as investors, too, much like we are as drivers on the road. Depending on your email subscriptions, news outlet preferences (company and type – radio/podcast, TV, or written), and social media news feeds, you might hear or read a very different take on what’s happening in the market, which leads to different suggestions on how to respond to what’s happening in the market. These competing narratives are all trying to accomplish similar goals of telling the audience what is happening, why it is happening, and often whose fault it is. Then, as the audience, you are left at the intersection of deciding what to do with all the inputs you just received. How do you sort through them, apply them to your life, and make decisions or changes based on what you heard? The better question might be, do I even need to make a change at all?
Michael Batnick wrote a short blog last week that summarized a wise approach on how to handle the intersection of market narratives and personal responses. Below is a snippet from his blog:
The investor narrative has changed over the last couple of weeks. It went from everyone thinking a recession was a fait accompli to maaaaybe we can actually escape its grip.… I chase narratives like everybody else, but you wouldn’t know it based on my portfolio. And that’s the way it should be, for the most part. So prepare yourself because there will be a lot of back and forth this year as new information comes to light. Always but especially now, the key to investing is not to chop yourself up as the market struggles to choose a direction. Do not get stuck in the narrative vortex.
What an excellent reminder for us at the beginning of a year that has already proven to have ups and downs in the market and economic storylines. As exciting as it can be to follow the news and make predictions about what’s to come, and debate with your neighbor about what the Fed will do next, the market narratives are not giving you a prescription to change your portfolio approach. Your portfolio is the vehicle that propels you to your long-term goals, so we have to be prepared to tune out the distractions that inevitably pop up.
We’ve built Beacon’s investment philosophy upon four pillars that help us navigate through responding to the various narratives around us.
- Minimize costs
- Invest tax-efficiently
- Eliminate market underperformance
- Avoid behavioral mistakes
Paying attention and being informed is important. However, part of being informed involves thinking critically about the source of the information and the storyline. Some questions to ask ourselves include: Am I only receiving news from one source? Have I looked to primary sources for this information or is it just from friends and acquaintances and strangers on my social media feeds? Does this story have an ulterior motive? Is it preying on my emotions?
Our investment philosophy helps to keep us, and our portfolios, in our lane, much like lane-assist features in our cars. As your financial advocates, we want to help you navigate safely through the noise. Often, that comes back to an active decision to stay the course. We can choose to keep our decisions about appropriate portfolio composition separate from the broader (often fear-mongering) narratives of the current investment world. So, to close with the words of Michael Batnick, “Do not get stuck in the narrative vortex,” but if you do, call us to help sort through the noise.
The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.