• Research and data-driven behavioral insights to guide client conversations

  • Practical application of behavioral finance to portfolio construction, management and analysis

  • Ideas, guides and materials designed to differentiate and grow your practice

  • Current market conditions from the Behavioral, Economic, Valuation, and Technical perspectives

Looking Past the Headlines

We are experiencing a new peak in the rhetoric around trade, geo-politics, the economy and the business cycle. We have also seen increased market volatility. It can be hard to know when to be concerned and when to tune out the noise. Having a consistent framework for viewing markets with a long-term perspective can be a valuable tool to help avoid costly behavioral mistakes. While there may be a heightened sense of fear in the headlines, based on our Market View, there is no reason to sound the alarm.

Chart 2019 05

Our Market View looks at economic, valuation, technical and behavioral indicators to gauge the overall health of the market. Manufacturing and service provider activity measures economic health which is currently positive. Overall stock prices relative to future earnings measure valuation and are currently elevated, but not extreme. Technical measures of short and medium-term momentum along with market participation are reading excellent. Finally, our unique behavioral measure of expected market returns, based on investor preferences, are in normal ranges. This sort of mixed overall picture is common and there is no cause for concern as long as the majority of indicators are in reasonable ranges. For the complete Market View click here.

For long-term investors, a consistent market view provides a solid foundation and calibration for reassurance that can help to avoid overreaction. While there is an ever-growing supply of things we could worry about, most of the time the markets and the economy are in relatively good shape and investors should stay on track with their long-term plans. So, enjoy the summer and take a break from worrying about the market.

From the Behavioral Viewpoint

What is going on?

  1. We are loss averse and constantly on the lookout for potential threats. We want to believe we can identify and avoid every threat.

  2. Availability bias causes us to give the endless supply of rhetoric and headlines more importance than they might otherwise deserve.

  3. We are subject to cascading and projection, where we build on events with speculation. “We will start a trade war, that will result in an economic meltdown, that will collapse the market and destroy my portfolio.”

  4. We suffer from emotional overload, amplified by information overload, and will often take action simply to relieve the emotional stress.

What can we do?

  1. Use a consistent approach to monitor the market and economy that keeps your emotions in check.

  2. Stick to the same metrics month-to-month and year-to-year to provide a stable frame of reference.

  3. Have a financial plan and make sound investment decisions based on a disciplined investment process.

  4. Work with a professional financial advisor who can provide valuable guidance to help you stay on track.

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Behavioral Viewpoints features new topics each month which are intended to help advisors and investors gain a deeper understanding of how behavior shapes the investing landscape. 

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The information provided here is for general informational purposes only and should not be considered an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  It should not be assumed that recommendations of AthenaInvest made herein or in the future will be profitable or will equal the past performance records of any AthenaInvest investment strategy or product.  There can be no assurance that future recommendations will achieve comparable results.  The author’s opinions may change, without notice, in reaction to shifting economic, market, business, and other conditions.  AthenaInvest disclaims any responsibility to update such views.  These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any AthenaInvest.

You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives and financial circumstances.  You should consult with a qualified financial adviser, legal or tax professional regarding your specific situation.  Investments involve risk and unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance.



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