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On what rational planet does an investor (or trader) forecast yesterday that the S&P 500 would be up 1.5% today after the April Jobs Report printed a 14.7% unemployment rate?

Well, I suppose that if I dug, I’d find SOMEONE out there in internet-land who forecasted it, but it’s unlikely that it’d be grounded in any sort of rational analysis…it would be more of a lucky guess.

Short-term forecasting is not a useful tool for a normal investor (or an advisory firm) to use in the creation or modification of a long-term investment strategy. I’ve had so many conversations and interactions across different sets of people that I’ve heard every conceivable forecast of what’s next…colleagues, analysts, institutional professionals, fellow Board members that sit on investment committees with me…

Clients, friends, rando’s who email me…

The guy who runs the local liquor store, who is curiously optimistic.

I’ve heard so much, I’m coining a new phrase for it (consider this an enforceable trademark)…

“Investi-guessing”

In case you missed the blog last week (come on, you don’t read everything I write, but you are still watching CNBC? FIX THAT.), here’s a blurb on forecasting:

“As for now, I’ll encourage readers to eschew all the forecasts being offered by people stupid enough to pay the placement fees to get on the business news (noise) channels – they are meaningless. People forecasting earnings, people forecasting GDP, people forecasting interest rates, and future inflation – they are all full of shit and it’s nothing but noise.

 

No one has any more of a clue what May 2021 will look like than they did about what today would look like back in May 2019.”

No one knows anything for sure. I promise. Sound investing needs to be grounded in facts and probabilities – and those are in short supply right now. I think the number one input into any model or decision matrix FOR THE SHORT-TERM is this…

Hope.

And right now, my hope is based on the expectation that no one is sparing any expense or effort towards finding a solution to this entire problem.

My hope comes from realizing that even though this is a terrible situation, it’s one that is caused by a shock rather than a massive accumulation of imbalances in the financial system, as in past recessions.

My hope is also bolstered by the increasing probability that economic activity has seemingly bottomed – which sounds a lot like a forecast, but it’s rooted in some fact-based observations…

Lockdowns are fading – I had to drive into the office the other day, and there was TRAFFIC.

Social distancing is waning – I saw people in parks, walking dogs, and gathering in small clusters having chats. I saw a neighbor on the sidewalk, and we chatted at a reasonable distance for 15 minutes.

People and businesses are adapting – I ask every small restaurant owner how they are doing, and while no one is printing record revenue, they all say the same thing, “We are doing okay and making it.”

I bring us back to a drawing I did a few weeks ago.

Monument's Take on COVID19

Everything is transforming and will continue to do so. That gives me hope, and that’s where I’m deriving my conviction from as I look at the long-term from an investing perspective.

Said differently, what do you think would happen to the economy if a vaccine were discovered tomorrow? With all the stimulus and pent up eagerness to get back to some sense of normalcy, I suspect we’ll see the ship quickly right itself.

And that day will come – it’s just impossible to tell when. So in the absence of that fact, be invested now for when that day comes.

True, some things may never go back to normal. Some old-line industries may disappear or change so much they don’t ever look the same again. Some new companies, technologies, and industries may spring up.

But who knows? This could all reverse tomorrow.

But that’s my point – anyone taking a stand on the short-term is “investi-guessing”, emphasis on guessing. Like anyone, I have no answer to these questions, only guesses:

“What’s going to happen in the market?”

“Do you think we will have a correction?”

“Do you think we have seen the bottom?”

“Don’t you think the virus will come back again worse when we get back to normal?”

“Do you think the Miller Lite tastes great or is less filling?”

With all that said, my advice remains the same…in that everyone should…

Keep looking forward,

Dave

 

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