View from the Chair: Windermere's Market Perspectives (October 2017)

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When reflecting on the current state of the markets and investors, we couldn't help but being reminded of a play many of you likely read in high school english - Waiting for Godot.

It's likely been a few years (or decades) since you last heard that title, so let us refresh your memory.  The play, written by Samuel Beckett, features two characters (Vladmir and Estragon) who await the arrival of someone called Godot, who never arrives.  The play contains many lines expressing their angst from waiting and inaction, including:   *"Let's go. We can't. Why not? We are waiting for Godot," "Nothing happens. Nobody comes, nobody goes," "What do we do know?  Wait," and 'That passed the time.  It would have passed in any case"

What about this play reminds us of today's markets?  In short, we see plenty of investors who appear to be playing the roles of Vladmir and Estragon, awaiting an arrival of something that may never actually appear. 

Over and over, we hear "when will this end, when is the correction coming, when will we experience the market situation we are afraid of?"  News media constantly reports new highs and record earnings, immediately followed by reports and op-eds that it's surely to reverse trend at some point.  Market participants are waiting for their own personal Godot.

We certainly recognize that recent market moves have been unlike anything we have seen in recent time.  As of October 9th, the S&P 500 had gone 333 days without a 5% drop, setting a new record not seen since 1994.  This lack of volatility has also been accompanied by outstanding market growth (see chart below) across almost all asset classes. 

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Following all these positive experiences, it's almost instinctive to start waiting - waiting for it all to end, for gains to be reversed, for our fearful thinking to be validated,.  And so, many investors wait - for their own Godot who may never appear.   

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What's an investor to do?  Our advice - reject the opening line of the play ("nothing to be done") and accept the fact that there are many actions we can take.  Let's take partial profits from names that have achieved meaningful gains.  Let's redeploy those gains to positions that have underperformed.  Let's ensure we have appropriate downside protection in our portfolios. Let's closely monitor global growth and economic data.  Let's keep moving.  

No offense to Vladmir or Estragon, but no one really likes to wait.   We're not waiting - we're moving forward and investing on.  Care to join us?