by Vicki Simpson: Trading Analyst; SoundView Advisors
Imagine you are on an adventure with two friends. You find yourselves on a trail through a scenic mountain range, providing you with many exciting vistas and valleys.
Lenny the leader is always looking ahead. Perhaps he sees a treacherous river crossing or maybe an inviting flower-filled meadow. One of these brings him great distress and turns him into a negative Nelly while the other sends his spirits soaring, all sunshine and optimism before he even gets there! Lenny’s mood is entirely dependent on what he thinks lies ahead of you on the trail.
Eddy the realist is always bringing up the rear. He must stop and document all the elements of every experience – taking a photo of each flower in the meadow; recording the force of the river current in his travel notebook and so on. Eddy tends to be reflective and fully caught up in the present moment.
In the meantime, you are in the middle of your traveling trio. One friend is urging you forward while the other is imploring you to linger. Is it better to look ahead like Lenny? Or should you be more concerned with present circumstances like Eddy?
If you haven’t guessed, in this example Lenny is the stock market and Eddy is the economy. One is forward-looking, seeing beyond the current circumstances, while the other lags behind documenting things as they are. We find ourselves in a strange time when the stock market seems to be frolicking in the meadow ahead, but the economy is still struggling to make it across the river. The second quarter of 2020 was dominated by a rising stock market during a global pandemic. We saw our country in a lockdown; curves that spiked, flattened, then fell; attempts at reopening; then a resurgence of COVID-19. Add to that, the Fed’s promises to keep the economy afloat, near-zero interest rates and a stock market that has regained most of its losses since March – it is difficult to know what to think or what to expect for the near future.
We must remind ourselves we have prepared our portfolios for times like these and choose the long-term view; we can acknowledge the volatility in the short-term without dwelling on it. This will allow us to both endure the valleys and enjoy the vistas along the way.
