Ball of Confusion

In the never-ending quest to divine the future of stock market returns, the pointy-headed prognosticators of Wall Street are having conniptions trying to predict where the U.S. economy is headed these days.  The experts’ forecasts range all over the place from cautiously optimistic to mildly complacent to totally terrified.

When you consider the many extraordinary and contradictory macro factors that have cropped up in recent months, the perplexity is understandable.  Here are just a few of the things forecasters must consider in their analyses: ongoing Covid-related supply constraints especially in China; extremely low unemployment in the U.S.; the Federal Reserve resolutely raising interest rates; low consumer-debt levels; commodity shortages made worse by the war in Ukraine; balance sheets of the big U.S. banks sturdier than they have been in decades; economic sanctions on major oil producers Russia, Iran, and Venezuela; home values at all-time highs; and a U.S. stock market that is down 20% so far this year.

It brings to mind an old song by the Temptations with this memorable refrain:

Great Googa Mooga,

Can’t you hear me talking to ya?

It’s a ball of confusion…

That’s the world we live in today, hey, hey.

It’s impossible to know with certainty where things will stand next week, let alone next month or next year.  But one thing we do know for certain is that stocks are significantly cheaper now than they were six months ago.  Now is an excellent time to buy shares of quality companies at reduced prices.

To be sure, the market bottom may not yet be established, but for long-term investors, the biggest risk is being on the sidelines when things begin to improve.  The best returns of any bull-run usually come early in the move, which we will only be aware of after it has occurred.

Speculators try to pick market bottoms; investors pick good companies selling at decent prices.  It’s time to be an investor.

Great Googa Mooga.

1 July 2022