We’re in the throes of Q3 reporting season. Investors around the country (including our clients) are getting the results of their portfolios through the end of last September. In short, it didn’t look good. The S&P fell about 8% from its high water mark, all during the end of the 3rd quarter. The sharp market downturn is story which institutional investors, board members, and investment committees are getting from their quarterly statements, all over the country.
The paradox is that October has almost perfectly erased the downturn, with the markets up about 7%-8% (depending on the index), so the market is exceptionally close to hitting all time highs again. Ironically, this actual result is coming just at the point that everyone is getting glum looking at Q3 2015 results.
For the some investors, the lesson from this odd occurrence is “timing is everything”. In other words, be sensitive to the exact timing of short term fluctuations to draw additional context around these market events. Respectfully, I might argue that the better lesson is to largely ignore the short term fluctuations in the market and focus on the long term. The reasons for the melt-down and recovery are largely psychological and based on mere guesstimates about global growth. Over time, these expectations of future earnings get gradually realized as actual earnings and incorporated into the value of securities. It’s important to monitor investment managers and the thesis for asset class exposure, but don’t let your mood (or worse, your investment decisions) get whipsawed by short term market fluctuations.