The Wit & Wisdom of George Constanza
As a financial planner that speaks with investors and other advisors every day, I sometimes get a unique look into the current psyche of the investing public. And, sure as day follows night, some things never change. When the market is going up, clients love to open up their account statements, discuss returns, and tell me where they think the next great investment opportunity is. Over the last few years I've heard about bitcoin, Gamestop, and multiple small biotechnology companies, among others. But, invariably, the bull market sheen wears off and stocks suffer through a period of sidewise or even negative returns, like 2022, and then clients aren't so excited to hear from me. Investment preferences shift to real estate, or I-Bonds, or dinner out. Of course, it's not just clients, take a look at this Bank of America Global Fund Manager Preference Survey:
Among fund managers, cash leads the way as an investment preference with US equities coming in LAST!
It's been said a bear market doesn't scare you out, it wears you out. And judging from what I, and other advisors, have been hearing lately, it seems we might be getting close to full exhaustion. Indeed, clients are no longer interested in making IRA contributions, shifting investment funds to real estate, and using savings accounts and short-term treasuries for their long-term investing. I could go on... And it's all, as the venerable George Constanza taught us decades ago, the opposite of what you want to do.
To be sure, none of this is to shame anyone in any way. Instead, it's meant to educate. What I feel is clients are getting worn out. They just don't care anymore. Treasury bonds and savings accounts are where it's at these days! Who wouldn't take a guaranteed four or five percent?! And, as an advisor, when I see attitudes like those described above become pervasive my spidey senses start tingling. I know we're getting closer to a more sustainable bottom because I heard exactly the opposite in January 2022. Back then it was, "Where do I sign? Take my money and invest it in US stocks now!"
And so, while I spent 2021 getting more cautious, now I'm getting more bullish. Maybe not fully so today, or next week, but sometime soon. If they haven't already, the ingredients are coming together. Might we be so lucky to get a "final flush?" I don't know. But I do know that now, when other investors are too worn out to care, too dejected to contribute another dollar, too exhausted to read another research report, is when you should be energized, preparing your shopping list, and stepping up your contributions. So, are you?