Stock markets dropped this month because of worries about Turkey’s economic crisis and U.S. tariffs on Turkey’s steel and aluminum exports. Stock markets rose this month because investors shrugged off Turkey’s economic crisis.
Are both true? Are neither true? We’ll never know. All kinds of things move markets, but whether Turkey’s economy is one of them is unanswerable. Markets are like the title of the Tom Cochrane song, Life is a Highway. Cars on a highway move in different directions at different times. Cars get on and get and off with no predictable pattern. The same applies to stocks and markets. On any given day some rise and some fall, not always in a logical way.
If you listen to the TV commentary, you get the impression that the pundits have an inside line on the future. But commentators have to fill air time, or the next day’s column, so they always have an opinion. We tend to treat the opinions as fact although if they could see the future, they would all be fabulously wealthy and give up their day jobs.
Rather than worrying about markets, it is far better for investors to pay attention to companies. Especially those with well defined businesses, that are leaders in their industries with a history of profitability, deep pockets and steadily rising dividends.
Successful investing always comes back to basics: sticking with quality, being patient, diversification and sticking to a plan. That way you don’t have to worry about why the market moved this week and whether that it will continue.
A strategy like that puts predictions in their rightful place.
This article was written for Harvest Portfolio Group.