The stock market is moderately lower this month. The Dow is down about 648 dollars or 2.3%. The Dow is up 1969 points or 7.95% for the quarter. While we have not made up all the ground lost as a result of COVID-19, the market is making very good progress towards that goal.
The topic of this newsletter will be skepticism towards financial media. As a result of COVID-19, the stock market this year has been extremely volatile. That volatility begets an opportunity for financial media, which has produced a countless amount of analysis, predictions, and recommendations. We caution you to take all those things with a grain of salt. The reason is that they do have a conflict of interest. While they do want to inform you about what is going on, they also want to sell their product. One of the objectives of a magazine is selling issues of that magazine. We are not suggesting that the media is lying; we are saying they will express the truth in the most exciting way possible in order to make more money. That way of expressing the truth may mislead you about what is going on.
An example of what we are talking about is the stock market returns in September. Someone can honestly say that the stock market declined more in September than in any other month since March. Hearing that you immediately freak out and think how you need to read more. You would think that the stock market is doing badly. However, as we stated in the first paragraph, the Dow in only down 2.3% for September, and the quarter is up 7.95%. The monthly result is completely meaningless. The slightly sour September result is a tiny blip on the overall upward trajectory of the stock market. As a result of COVID-19, the stock market collapsed in March. Since then the DOW has been roaring. It has gone up 49.4%. The first story, while 100% true, may have given you the wrong idea about what is going on.
The savvy investor needs to take a long-term view of the market. There will always be noise in the short-term, that fluctuation smooths out in the long-term. The Dow is down about 2.97% for the year. The Dow has gone up 24% over the last 3 years. We assert that the short-term results are meaningless.
If you have any questions about this topic or any other, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust.
Daniel and Eli
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Questions for the comments
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