Market Trends 2022 – Q2

The Weight of the Evidence

President Franklin Delano Roosevelt famously said that “the only thing
to fear is fear itself.”

The human race was built with a natural instinct to fear and to always
be on the lookout for danger. When wild animals or reptiles roamed
free, the panic instinct was necessary for survival. While today,
most of us no longer worry about carnivores or poisonous creatures on
a daily basis, the amygdala region of our brain is still on the constant
lookout for danger.

A frequent cause of fear in our modern world is generated by
headlines, whether from traditional news sources or social media. The
amygdala virtually ignores good news and is laser-focused on anything
bad, whether real or imagined. There is no lack of fearful headlines
today, including pandemics, inflation, war, elections, market volatility,
and recession. While some who panic say that “This time is different!”,
almost everything we see today in the real economy and the markets
we’ve seen before in one form or another. And while we don’t always
know where the volatility will come from, the portfolios we manage are
constructed assuming that there will be volatility. That is why we
continuously research and monitor the economy and markets, in an
attempt to construct what we refer to as Honolulu allocations.

Why? Honolulu, Hawaii is sometimes referred to as paradise because it
almost never gets too hot nor too cold. Similarly, the Honolulu
allocations help us smooth out the ride and dampen the volatility by not
chasing exuberant highs or panicking just because others do. Our
decades of experience have taught us that smoothing out the ride
mitigates one’s emotions and helps one make more rational decisions.

The Weight of the Evidence currently tells us that while there is lots of
good news that receives few headlines there are a number of real
headwinds that ought not to be ignored. For that reason, we’ve invited
Meera Pandit, a well-respected global market strategist, to be our
special guest for our Tanglewood Legacy Talks webinar on April
13th. You should have already received an email invitation. If you did
not, please let us know. We hope you will join us.