In March, stocks continued to climb. US small cap stocks led, followed by international and US large cap. Bonds also increased in value. For the calendar year, all three stock categories have gone up, while bonds have decreased.
Prediction vs. Preparedness
Over the past few years, the stock market has struggled at times. It declined for most of 2022, rallied for the first half of 2023, and then fell again in Q3 2023. The most recent low point of the S&P 500 occurred on October 27th, 2023, when the index level was 4,103.78. Investors were feeling frustrated with the lack of growth in the market, shown by the graph below:
Since that time, the S&P 500 is up over 28% over the past five months. This significant increase in the market is not something many people expected or predicted.
This is important because we are always surrounded by a constant stream of predictions like:
- Candidate X will win the presidential election in November
- Team Y will win the NCAA basketball tournament
- The weather will be sunny and warm a week from now
Predictions help us process what probably will happen. They can be entertaining, help us plan, or reduce feelings of anxiety and uncertainty. They can also help us express our curiosity or wonder about what may happen next. We also can’t escape them – all of us have feelings, inklings, and ideas about the future. When you make a prediction that comes true, it is incredibly gratifying. Sometimes, however, things don’t turn out the way we thought they would.
With regard to investment portfolios, bad things can happen when they rely heavily, or solely, on inaccurate predictions. So instead of focusing all of our energy on figuring out the future, we also want to be prepared for a range of outcomes. Will we be able to deal with stock markets going up or down 15% from current levels? Can we survive regardless of which political party holds more power in November? What if our tax rates go up, or the Federal Reserve keeps interest rates higher than expected? Or if we have an unexpected geopolitical event? In order to succeed financially, we need stay invested through situations like these at some point.
By cultivating preparedness, we can anticipate challenges, maintain readiness, and tackle unforeseen circumstances of all kinds. If you want to talk about how your portfolio is positioned for an unpredictable future, or just make a fun prediction, let us know!
