Macro Minute: Week of July 31, 2023

I recently stumbled upon some great charts from @MnkeDaniel on Twitter. I have said, and heard it said, for years that every time in history is full of reasons not to invest. We look back and think, “Man, it would have been easy to make a ton of money back then!” because we know now that it all worked out.

In that moment, it was as terrifying as deciding to invest right now. This is called “hindsight bias”, and it can lead us into thinking the future will not be as bright as the past. 

Since 1950, the S&P 500 has gone up 100x after inflation. That time period included eight recessions, multiple military actions, and great changes in interest rates. There is always some reason to sell or not invest, but history shows that’s not the way to make the highest returns.

We can see that as time has gone on, we have held positions for shorter and shorter time periods.

We also know that the longer we hold a position, the more likely there will be positive returns.

We hold investments for longer time periods because we know these things to be true. If you have feelings that make you want to sell a particular holding, ask yourself, “Is there something that has happened in that holding that would justify selling or am I just nervous because of something I heard?”

While it can be challenging to hold onto investments during uncertain times, historical evidence demonstrates the rewards of doing so.

DISCLOSURES:

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