The June market digest was almost ready  send out and initially it focused on analyzing the impact of US-China Trade War on global economies and stock markets, but things changed so rapidly within the world of trade and politics that it made the material for the market digest outdated even before it could be sent to the printers. So, I went back to the drawing board and started from scratch. Within the last three to four weeks consider this whirlwind pace of events: 

• President Trump tweeted threats to impose tariffs on Mexico to deal with a non-trade issue, which is Immigration.
• Federal Reserve Bank changed their position a 180 degrees from continuing  to increase interest rate hikes (December 2018) to willingness to consider cutting interest rates in the coming months (June 2019).  
• The stock market is anticipating two or three interest rate cuts this year with the first one as early as July 2019.
• Bank of Japan announced a readiness to cut rates and expand their buying of Japanese blue-chip stocks in Japan’s stock market.
• European Central Bank (ECB) announced that it is going to delay raising its interest rates (they are currently at negative interest rates and will stay that way for longer). Chairman Draghi of the ECB said that they would also be willing to consider relaunching quantitative easing again.
• Reserve Bank of India cut its interest rates twice in the last 5 months.
• Chile’s Central Bank stunned the markets by cutting interest rates 0.5% -its biggest rate cut in a decade.
• President Trump and Premier Xi have announced a meeting on the sidelines of the G20 summit.
• And finally, news outlets are reporting that in February 2019 President Trump explored the legality of demoting Chairman Powell.

​Phew!!! Will someone pass the popcorn please. Whatever happened to the lazy, hazy dog days of summer when nothing happened! 
Any missive on the importance of the absolute independence of the Federal Reserve Bank and the consequences of even a perception that the Fed was doing the bidding of the Politics du Jour will have to wait for another day. Let’s take a step back from all this fast-paced noise and focus instead on the essential picture – Central Bank Interventions. It is not that the central banks of all these economies are engaging in a coordinated global intervention. Each bank is focused on its own economy, but in the process, they are creating global central bank intervention (albeit uncoordinated). And this will have significant consequences for global stock and bond markets in the short-term and the long-term. 
 

On September 22nd, 2015 Yogi Berra passed away and the world of baseball lost one of its greatest players.  I don’t pretend to know the rules of baseball, let alone be able to play it even at t-ball level!! But I tremendously enjoy Yogi Berra’s quotes and find the one above particularly relevant.

One of the biggest realities is that human beings as investors are far more emotional than we care to admit. We chose to ignore what we don’t want to hear.  Human psychology is such that we vacillate between the fear of losing money and the fear of missing out on the opportunity to make more money. From 2003-2007, many investors worried only about maximizing returns. If their friend’s portfolio was up 20%, they wanted to be in the same investment(s) with little regard for the suitability of the investment(s) for their personal situation. The common mantra was to chase returns, afraid to lose out on the opportunity to make more money. However, during the height of the financial crisis 2008-09, a large proportion of investors swung to the other end of the pendulum and scrambled to get out of the market with the loud cry, “I don’t care if I don’t make another penny in the market; I just don’t want to lose any more. Get me out of the market!! Now!!!” Unfortunately, such behavior can lead to emotional decisions and some (if not all) of those decisions can have significant influence on a person’s standard of living.

You want to think less in terms of investments and more in terms of your ultimate goals in life.  Investments are important, but they are a part of the big picture of your personal life. Money is essentially a tool, which can help you accomplish most of your needs, wants and wishes in life. However, not having a financial plan that charts out a strategy for accomplishing your goals in life makes you run a higher risk of winding up “…someplace else” (Yogi Berra).  No one would seriously consider building a house without any kind of a blueprint.  Homeowners do not simply throw up a house without a plan and then knock off walls and/or build extensions as their personal needs change. Yet, over and over again I see folks investing without any bigger picture of how this strategy aligns with their goal of accomplishing their personal financial objectives.

This is the start of the last quarter in the calendar year and lots of people will conduct a year-end-review with their financial advisor or broker or insurance agent, whoever they have hired.  I can bet that a vast majority of these meetings will focus on how their mutual fund and/or portfolio did relative to either some type of a market benchmark or a combination of benchmarks. Trying to beat the market is a fruitless game for long-term investors.  In fact, it has been established in academic research that while Wall Street wants you to compare your portfolio to the “market” such as the S&P 500 index, over a long period you are highly unlikely to beat a benchmark index because an index does not have any taxes, costs, cash or any life expectancy requirements like you do.

Changing the lens of one’s perspective can make a big difference regarding how well you are able to accomplish your goals. Strive to match your portfolio with your personal goals, objectives and time frame so that you don’t take on any more risk than is necessary to accomplish your objectives.

Have a great weekend.
Mou Das