January Newsletter

DURING THE PAST CALENDAR YEAR, THE FOLLOWING events took place:

• The stock of the leading U.S. chip manufacturer tripled.
• The Fed reduced its essential interest rate a quarter of a point one day in December, just like everyone expected they would. And the S&P 500 went down pretty close to three percent that day.
• The VIX—which journalism describes as the fear in- dex, but which I prefer to think of as the stock market’s blood pressure—went up 172% in one day, in part be- cause of the unwinding of something nobody had ever heard of before called the yen carry trade. (If that actually were someone’s blood pressure, he’d have had a stroke.)
• The stock of a company that buys and holds a particular cryptocurrency—that’s all it does—went up about 480%. There was more, but you get the point. The year 2024 was replete with utterly astonishing surprises—both posi- tive and negative—that seemed to come out of nowhere.

Like every other year.

Does anyone remember that interesting year 2022, when inflation spiked to nine percent? And set off the fastest, steepest sequence of Fed rate hikes that produced the worst year for the traditional 60/40 portfolio since 1937? (That’s not a misprint.)

How about 2020, when a deadly hundred-year plague shut down the world economy, and caused the S&P 500 to decline 34% in 33 calendar days?

Note that this entire Litany of Astonishment covers a mere four years.

Now layer in just a few of the massive political/geopo- litical shocks of this same period:

• The war in Ukraine.
• Hamas’s invasion of Israel, and the latter’s response throughout the region.
• The sudden and total collapse of the 50-year regime in Syria.

The year 2024 was replete with utterly astonishing surprises—both positive and negative—that seemed to come out of nowhere. Like every other year.

• A sitting U.S. president driven from his reelection campaign on grounds of incapacity, about 100 days be- fore the election.
• The resounding reelection to the presidency of a per- son awaiting sentencing in a felony case.

One can go on and on like this. But the twofold con- clusion should be obvious. (1) The economy, the markets, politics and geopolitics are for all practical purposes per- fectly unpredictable. The only constant is complete sur- prise. (2) If we let utterly random current events of any kind alter our investment policy, we never really had an investment policy, and are thus doomed to fail as investors.

If this recitation accomplishes nothing else, I hope it convinces you to start the year by sitting down with your financial advisor. And saying in effect, “I get it now. I can never be a successful investor by trying to anticipate the news, and even less by reacting to the news. Let’s finally make a plan I can stick with through good news, bad news, and totally random news.”

Permit me to suggest that all of investing can be encap- sulated in that simple duality: are we going to run our investment portfolios based on a plan, or in response to an endless stream of news that comes relentlessly at us from deep left field?

© January 2025 Nick Murray. All rights reserved. Used by permission