By Matt Miller
Just the other morning, as I was getting dressed with a “business news” channel playing in the background, I heard the announcer say: “There are more sellers than buyers in the market today!”
Instantly, I thought, “How misleading! It’s not as if there are orphan stocks out there looking for someone to buy them!”
As someone who strives to help guide your financial future, I can’t help but tune into these messages, which I believe are distorted. Is the media confused about what is actually happening in investing, or are they trying to confuse us? Good question – and one without a good answer.
One of the best things you can do is to inform yourself before acting on any advice. Here’s the first lesson: the financial markets are no different than any other kind of market. It’s a fact that for every seller of a share, there needs to be a buyer for that share. There is no pool of orphan shares waiting for buyers or sellers. Just like in any other market, for a transaction to occur, both the buyer and seller must each believe they are getting a good deal.
Wall Street has been known to paint distorted pictures, and they can cause urgency, panic and rash decision-making. On that same business channel, I also overheard the announcer discussing the current interest rate environment. He explained that when rates begin to increase, stocks will tumble as the cost of borrowing escalates. His prediction might end up being right, but markets aren’t that simple. Markets are constantly digesting all kinds of information, with rising rates being just one element of the financial landscape.
As we always do at SJS, let’s turn to data. The chart below documents the performance of equities during time periods of rising rates.[1]
Data needs to be much more robust than the four observations above for academics and researchers to conclude any kind of statistical significance, but the performance of stocks throughout the time periods shown does illustrate that rising interest rates don’t necessarily have a negative effect on equities.
It’s easy to want to look for that one answer, a singular “cause and effect” – but there are so many factors that can influence a stock’s price. The stock market is the ultimate crystal ball, with a stock’s price representing a vast array of information and the opinions of millions of intelligent market participants. Think about it the next time you get that “outstanding” stock tip at your neighbor’s barbecue. On average, there are more than 40 million trades a day representing more than $200 billion in volume.[2] The majority of these transactions are being done by extremely intelligent individuals who spend their entire lives researching securities. Do you really think the average consumer – or even media reporter – knows something that hasn’t already been factored into the price of that stock?
At SJS, we admit that we have no idea where the market will go tomorrow, but we do believe in markets and the long term historical return on invested capital. Ups and downs will happen, which is why a well-diversified, disciplined, long-term approach is a sound strategy. That’s one of the foundations of MarketPlus® Investing. If you’d like to learn more, or would like some clarity amidst the noise, we are here.
Important Disclosure and Sources:
[1] Graph source: Dimensional Fund Advisors. Russell 3000 excluded from the 1976-1980 analysis due to later inception date. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Performance data shown represents past performance and is no guarantee of future results. Performance for periods greater than one year are annualized. Instances of rising rates used in analysis are time periods where rates have increased by more than 150 basis points over at least 12 months. For illustrative purposes only. Data sources: The S&P data are provided by Standard & Poor’s Index Services Group; Russell data copyright, Russell Investment Group 1995-2013, all rights reserved; CRSP data provided by the Center for Research in Security Prices, University of Chicago.
[2] Trading data provided by Dimensional Fund Advisors
Suggested Reading
SJS Investment Services has been recognized in CNBC’s 2024 FA 100 list, an annual ranking of registered investment advisory (RIA) firms within the USA.
SJS Investment Services has been recognized in the Forbes / SHOOK 2024 list of America’s Top RIA (Registered Investor Advisor) Firms.
Every four years, we get the same question (whether you have asked it, or you are thinking it) – how will the election affect my portfolio?
As we approach the end of the year, we want to highlight some important financial items to review before the new year.
This Outlook includes our discussion of election time, financial to-dos before the end of the year, new SJS Perrysburg office, SJS Team updates, and looking forward to Q4 2024.
SJS Investment Services has been recognized in Financial Advisor Magazine’s 2024 Registered Investment Advisor (RIA) Ranking, an annual ranking of independent investment advisory firms within the United States.
As I approach my 40th anniversary as a financial advisor, I can't help but look back on the road I've traveled.
While people commonly hold their cash within checking and savings accounts, we want to highlight three short-term, interest-bearing investments that can be held within your investment account.
This Outlook includes Founder & CEO Scott J. Savage’s gratitude for your 40 years of trust, how you can earn more interest on your cash, welcoming new SJS Team members, and looking forward to Q3 2024.
For five graduating high school Seniors who shadowed us recently, we asked each student to write a summary of what they learned during the week.
One of The Ability Center’s services is the Assistance Dog training program, which helps individuals with disabilities achieve greater independence.
When working with investment managers, we want them to share that same client-first philosophy and sit on the same side of the table with us.
We want to emphasize some best practices that can help us work together to ensure your information and assets remain safe.
The Outlook includes our evolving MarketPlus® Investing philosophy by standing on the shoulders of giants, and ways to help protect your personal information and financial assets. We also highlight The Ability Center and look forward to Q2 2024.
SRDAX is a shining example of the value alternatives can bring to traditional stock and bond strategies.
As we begin the new year, we have some ideas for concrete actions to start your new year on the right foot, financially.
Isn’t this picture magical? It's Main Street in Sylvania, Ohio, the small town where I founded SJS over 28 years ago!
The SJS Q4 2023 Outlook includes our insights on small town values, MarketPlus® Investing, and planning financially for the new year. We also highlight new SJS Team members and look forward to Q1 2024.
To help you financially plan for 2024, we provide this resource with important numbers for the upcoming year.
SJS Investment Services has been recognized in the Forbes / SHOOK 2023 list of America’s Top RIA (Registered Investor Advisor) Firms.
In addition to family gifting, many individuals support giving to organizations that aim to help their communities. We highlight some strategies to make the most of your giving dollars.
You can consider putting excess cash into a money market fund, short-term U.S. Treasury bonds, or a short-term bond mutual fund / ETF.
The future of the housing market is uncertain, and its resilience will be a crucial factor in the broader economic landscape.
The SJS Q3 2023 Outlook includes our insights on gifting and charitable contributions as well as U.S. real estate. We also look forward to Q4 2023.
SJS Investment Services has been recognized in CNBC’s 2023 FA 100 list, an annual ranking of registered investment advisory (RIA) firms within the United States.
International Samaritan is a 501(c)(3) nonprofit organization that is working to break the chains of poverty and improving lives, particularly within garbage dump communities worldwide.
SJS has been recognized in Financial Advisor Magazine’s 2023 Registered Investment Advisor (RIA) Ranking, an annual ranking of independent investment advisory firms within the United States.
The SJS Mission is to empower you to build a better life. That extends to our teammates, clients, and community members.
The SJS Q2 2023 Outlook includes our insights on building up our local communities as well as market performance so far in 2023. We also share even more members of the SJS family and look forward to Q3 2023.
It’s important to recognize how difficult it is to predict what will happen in the short-term for investment markets, and how much margin for error there should be for any prediction.