“When I am asked what I worry about in the market, the answer usually is “nothing”, because everyone else in the market seems to spend an inordinate amount of time worrying, and so all of the relevant worries seem to be covered. My worries won’t have any impact except to detract from something much more useful, which is trying to make good long-term investment decisions.” (Miller Value Partners, 3Q21 Commentary)
Above is a parting thought from one of the world’s most prominent investors, Bill Miller, in his final quarterly market commentary before handing over the duties to members of his firm. Miller has long noted that forecasting the market is a waste of time as the future is unknowable. Expert predictions tend to be nothing of the sort in complex systems such as the stock market or the economy.
For individual investors, this message should be long remembered. Worrying about the market’s next dip will give you nothing but headaches that are often long lasting (see the countless headlines over the last decade calling for a “bubble” to pop). What you should focus on, rather, is the last piece of his quote, “make good long-term investment decisions”. Match your portfolio to your long-term needs and goals. Construct it in a way that will give you a high probability of success.
Inflation may last and it may not. Stock market leadership may rotate away from Facebook, Microsoft, Apple, Amazon, and Google or these mammoth companies may continue to outpace their peers. International stocks may outperform U.S. stocks for an extended period, or superior returns in the U.S. may continue unmitigated. Bond yields may further rise, and prices fall, or the era of low interest rates may perpetuate. There is no shortage of arguments on each side of these debates. The pandemic has created lingering uncertainties in many areas (supply chains, labor markets, speculative assets, fiscal stimulus and the budget deficit) that have the potential to affect the stock market.
Stock prices are an aggregation of all the worries, opinions, views, and analysis of the millions of investors participating in the market. Chances are that your specific worry is known and reflected. Sound portfolio construction with a foundation in matching risk/reward with time horizons and individual goals is the best way to handle the unforeseen risks that are sure to come. If you are well diversified and sticking to a plan that fits your individual circumstances, why worry? Let the market do that for you.