Market Memo: Caught in a waiting game

08-22-2017

“In this economy? When things at work get better.”

“Invest now? Have you seen the news lately?”

These days, such phrases are quite common around the dinner table, in board rooms and at investment meetings. It seems every week, investors eagerly anticipate some surprise in the economic data that could change the market or economy. We wait for GDP growth to pick up. Companies wait for spending to accelerate. Employees wait for wages to increase. And so on and so on.

The latest waiting game, market pundits tell us, centers on “black swan” events that aren’t priced into today's markets. Maybe the outbreak of a deadly conflict with North Korea. Or the potential launch of impeachment proceedings in Congress. The market trades at a price-earnings (P/E) multiple that few experts can defend, so they rationalize by focusing on possible dangers that may lie ahead. Just wait.

What if I told you maybe all of the risks are priced into today’s market and the higher multiple is because the major indexes are filled with risk-takers who aren’t waiting? They’re too busy creating economic growth, despite macro data points that don’t seem to abide by historic preconditions. Jeff Bezos isn't waiting for consumers to improve at Amazon. Progress in shale productivity isn’t waiting for oil prices to go higher. Artificial intelligence companies aren’t waiting for a stronger economy to continue with an “arms-race” of infrastructure to spawn new industries, from robotics to autonomous vehicles, creating previously unthinkable markets along the way. These digitally driven businesses are generating jobs, value, profits and savings for millions of Americans, not taking them away.

The opportunity cost? The opportunity missed
If we spent our lives waiting or pricing in black-swan events, we may end up missing potential opportunities or paying a premium when we do decide to act. Pricing risk still relies on the human element. So I ask, does a cheaper ETF price risk more accurately than a professional advisor or seasoned portfolio manager who deals with these emotions every day, and who spends their time studying and meeting with the companies and entrepreneurs who don’t wait to pursue their goals? Life's investments are full of risks. But waiting for the next dip or letting the nightly news scare you at every turn presents missed opportunities to reach investment goals.

Consider why our country is so innovative and therefore so wealthy. It’s because the U.S. was built by risk-takers. Many of our ancestors made the ultimate risk in coming here, risking everything they had from a previous country just for the opportunity to be a part of the free market. Indeed, America's great entrepreneurs didn’t wait for a policy change or a big event to happen—they took risks and solved problems. John D. Rockefeller gave fuel to millions. George Westinghouse made electricity more reliable and widespread. Andrew Carnegie helped make steel cheap and accessible.

The bottom line: long-term investors can spend their lives waiting … for a dip, an event or correction. Or they can embrace the constant innovation, economic freedoms and progress from the risk-takers who gave us General Electric, Microsoft, Amazon and many more to come. Personally, I prefer the latter.