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The Beautiful Wall of Worry | Sean Barron

One of the most dreadful things to occur prior to a busy day at work is a restless night of sleep. You know, one of those in which it feels like you are waking up at every possible hour? And when you feel rest is within arms’ reach…the alarm clock sounds! This is how the stock market has behaved over the last few years. It has been restless, being “awakened” and disturbed by a myriad of shocking events at the most inopportune times. For the duration of this disturbed course, some of us have also lost our sleep, having been stirred by the sound of every noise and alarm clocks that prevented us from keeping our peace.

We held our breath at the news that the Euro could possibility collapse. We held it for a little longer when we thought the U.S. might default on its debt. We witnessed the creation of an unprecedented bond buying program by not only the Fed but also by the Bank of Japan. We watched with an apprehensive curiosity the unfolding of political unrest in many countries of the world. We were shocked as we saw interest rates spike and the bond bull market end…the list goes on.

I was recently at a Federated conference and the presenter very appropriately described this sequence of events as the “beautiful wall of worry”. But we have good news to share with you today – yes, good news is still cherished and published these days! The above graph, which plots the VIX (a measure of volatility in the stock market and so called “fear gauge”) and the S&P 500 index, clearly shows fundamentals do trump the short term doom and gloom you often hear about!

And here is more good news…despite the never-ending stream of “crisis” over the last four years, the stock market has MORE than doubled during that time! As I said in this video during a very volatile 2011, volatility creates opportunity. It is for that very reason we in the trust department have been overweight risk assets (equities, high-yield bonds and/or alternative assets) since mid-2009.

Having said that, we want you to know we appreciate the trust our clients have placed in us to manage their account through this turbulent, but highly profitable time. Thank you for allowing us to stick with the long-term plan even when faced with short-term uncertainty.

We hope that when the market behaves like an insomniac again, you will remember this big picture view. When you do, may you rest soundly. And if you are tempted to despair, remember the year of 1990…if the Berlin Wall collapsed, then the “beautiful wall of worry” shall as well.

 

Author: Sean Barron
Co-author: Larissa Cantarella

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