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“Money!!!”

Published by: Nathan Smith Date: February 15, 2019

In the immortal words of Vol color commentator Bert Bertelkamp, the Tennessee Volunteers have been “Money!!!” this season. Anyone living in East TN is reveling in the current basketball season as Tennessee is currently ranked number one in the nation and will face a tough game versus Kentucky in Lexington on Saturday. While I have always rooted for Indiana basketball growing up (even though I went to Purdue), the Vols play this season has also turned me into a bandwagon fan and took my kids to a watch a game this season. Since they were born in Knoxville, they will end up being a lifelong Vols fan, and I have come to terms with this and can be thankful that at least they won’t be Kentucky fans.
After a frustrating December to finish the year that saw the S&P 500 down 9%, the market rebounded strongly in January and recorded the best January performance since 1987 at 8%. Market commentators, much like basketball stat hounds have noted that given the strong January that historically this means the market will be higher at the end of the year. The performance in January sparked many articles that looked like this:

 

 

Source: CNBC.com
Given what has happened in January is this something that investors should be aware of as they review their allocation of stocks and bonds?

 

Not precisely. A few things to point out as the article above did, is that last January the S&P 500 was up 5.7%, but finished the year down -4.4%, and looking at the data going back to 1926 the market ends higher about 73% of years, with only 27% of years down. The breakdown of the scenarios is below.

 

 

 

You can slice and dice the numbers in as many ways as you like until you arrive at the outcome that you are seeking, but that doesn’t mean that you will be proven right in the end. Much like basketball stat gurus like to tell you how many times a team has won or lost given that they’re playing an away game on a Saturday at 8 p.m. EST in Lexington, ultimately that isn’t what will determine the outcome of the game. As much as we strive to be able to analyze this kind of data to predict what is going to happen in the future, it’s just not possible.
What we can do as investors is maintain our focus on the factors that have been proven to persistent, pervasive and repeatable across all markets whether that is U.S. markets, international markets, or emerging markets. All investors want to be able to look at their long-term financial goals and say “Money!!!”, and can better accomplish this by focusing on using global diversification to their advantage, low-cost investments, and disciplined rebalancing. This emphasis will put them in a better place than those investors deciding their portfolio allocation based on spurious correlations.