The Delta Variant's Effects on Markets
Market Update
It’s official; the shortest recession in US history has been officially declared- 2 months! It was also one of the steepest. Does anyone remember the fear, paralysis and unknown of a public health emergency? The recovery in asset values has also set records. Stock prices, housing values, price and wages increased as well as record low interest rates. Makes your head turn for sure.
This week, the Delta variant caused great concern in the stock market and caused intermediate and long-term interest rates to plummet. Markets are supposed to be a forward-looking mechanism, meaning the gains over the past year were discounting what we are seeing in earnings growth now. Based on fundamental measures such as price earnings ratios, dividend rates, and price to sales, stock prices are fully valued. In fact, stocks have been fully valued based on fundamental measures for quite awhile, proof that markets are impossible to time. Let’s just wait a day and see what happens.
So I waited a day and the stock market regained almost all its losses from Monday. Now more than ever, it may be tempting to watch stock prices daily with expectations about timing, for both sales and buys, yet the data bears out that over the long term, market timing doesn't reliably translate into consistent, efficient returns. If you miss 10 days of the biggest market advances, the result over the last 10 years for the S&P 500 would mean that your gains on $100k would be almost $100k less than if you stayed invested. Geez. Also why our investment strategy subscribes to well diversified, index investing (also known as Modern Portfolio Theory and “passive” investment strategy.)
March 2020 presented investors with the highest level of the fear index in many years. Many investors fled the stock market and look what happened. Same with 2008-9 selling and missing the gains from the depth of the financial meltdown.
Behavioral Science
An interesting article from CNBC: “A psychotherapist says parents who raise confident, mentally strong kids always do these 3 things when praising their children.” Here is the link: https://www.cnbc.com/2021/07/15/a-psychotherapist-shares-how-parents-of-confident-and-mentally-strong-kids-praise-their-children.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail.
We all praise our children- or we all should be praising our children, but there are some strategies that work better than others. In a research study, children who were praised because they were smart vs. praised because they work hard had different results when presented with a puzzle. Those praised for working hard selected the more difficult puzzle while those who were praised for being smart were less eager for a challenge, reasoning that if they couldn’t complete a harder puzzle then the result must mean their smartness is wearing off. The strategy is to praise the process of the child, not the end result.
Praising by comparing your child to other children can cause a focus on a situation where they will not always be better. It is more beneficial to compare their current results with their own past results. Think personal bests!
When you reward your child with a generalized statement like "that is really good," tell them specifically what you see that impresses you or stands out for you.
Early in my career, I was an elementary school guidance counselor. I spent so much of my time talking about these issues with both parents, teachers and students. When your child comes home from school and you ask them how their day was and they say “good,” ask them what something good that happened that day was.
First SAS Team Gathering since Pre-Pandemic!
Myself, Elizabeth, and Monique joined in with our intern(!) and a fourth(!) advisor who will be joining us on the SAS team in the coming months. We’re growing! Our summer picnic in the Presidio in San Francisco was a perfect opportunity to get together, not only with each other as work colleagues, but also with our families and kids. So grateful to be able to safely celebrate milestones like our team’s growth.
This website is informational only and does not constitute investment advice or a solicitation. Investments and investment strategies recommended in this blog may not be suitable for all investors. SAS Financial Advisors, LLC and its members may hold positions in the securities mentioned within this newsletter.
