Breadth Thrusts & Bread Crusts: What A Week!

At home, we’re enduring a cold snap. It’s “warming up” if temperatures climb into the double digits. That means we’re generally stuck inside. After a number of narrow escapes, one of our kids came down COVID. She’s in her room (starting to feel better but definitely bored) and the rest of us are hanging out around the house. The return trip to college is delayed, and we’re missing a grade school basketball game. 

This quote from Milwaukee Bucks forward (and fan favorite) Bobby Portis resonates with me: “They call these the dog days of the NBA.” He was describing the challenging stretch of games just before the All Star Break. Players have to maintain focus and find ways to build on their progress. It’s tough work now. But it puts you in a better position later.

Rather than just holding on (in the market or at home), we can use this time to our advantage. Strategists will tell you that taking drastic actions in the face of volatility is unwise. Investors need to stick to their plans. 

That may be true. But it doesn’t go far enough. A better approach is to ask what signal the market is sending through the noise of volatility, and whether our portfolios are properly positioned.

Sometimes, it’s just noise and no action is necessary. Other times, volatility can be a wake-up call as trends that were in place yield to new trends that have not yet been embraced. When we look at the recent volatility through the lens of commodities vs stocks, or the energy sector vs the technology sector, it certainly appears that the trends of the past decade are giving way to a new reality. 

Old trends are fading and new leaders have emerged. Rather than coming up with new approaches to justify staying the course, we can use existing approaches to justify setting a new course. If volatility is too much to bear, reducing risk is always a solution. As Jason Zweig wrote in the Wall Street Journal this week: "If you can’t take the pain, you should feel no shame about staying on—or moving to—the sidelines." 

At home, we are drinking tea, making soup, and getting plenty of rest. Our daughter is feeling better. The rest of us are trying to stay healthy. 

We can’t do anything about the weather. But we can think about warmer times. We ordered our seeds and are starting to plan the summer garden.

The dog days will fade and a more favorable rhythm will emerge. 

We don’t just want to wait for tomorrow – we’re preparing for it.