Professor Eugene Fama and David Booth discuss the Federal Reserve’s perceived impact on market interest rates.
I’m sure the uncertainty caused by the Coronavirus has every investor concerned about the future of their portfolio and the market. Will the market go up or will it continue to slide until there is hardly anything left? No one knows. But the one thing we do know, based on over 95 years of data, is that the market will always reflect the future expected cash flows of the underlying companies.
If an investor believes that business will stop earning income indefinitely and that the earnings of the past are gone forever, then they will react pessimistically. However, if they believe in free enterprise, capitalism, and the spirit of the entrepreneur, they will be optimistic, believing the public companies will recover the revenues in time and forge ahead.
Almost all of our clients and friends are investors, not gamblers. But if I were a gambler, I would never bet against the American spirit and the resilience of corporate America.
Stay safe and calm. This too will pass.
In recent days, the increase in volatility in the stock market has resulted in renewed anxiety for many investors. While it may be difficult to remain calm during a substantial market decline, it is important to remember that volatility is a normal part of investing. Additionally, for long-term investors, reacting emotionally to volatile markets may be more detrimental to portfolio performance than the drawdown itself.
What should you make of recent ups and downs in the stock market? Here’s helpful context on volatility and expected returns.
Eugene Fama and Kenneth French describe how the academic model has shaped Dimensional’s ideas, culture, and investment process.