Monthly Market Muhsings - September 2020
Markus Muhs - Oct 03, 2020
Slow-cooking our way to financial independence, one month at a time!
I started doing monthly updates about the markets some number of years ago, which gradually I've come to call my "Market Muhsings". A little play on my name, as well as a clue to the question I get a lot: "how do you pronounce that?"* Where other advisors might do a "market update", I try to detract from the importance of monthly market activity (because it really isn't important) and use this space to make either random observations or provide a bit of education about the markets.
To some extent, there is some relevancy to what the markets did in September, but only because it gets reported to us so much. I find nightly market updates in the news, or minute-by-minute updates via the financial noise networks to be obscene. You all likely get monthly or quarterly statements of your accounts though and I find that observing those statements in absentia of any awareness of what the markets did and how they acted can lead to more bad than good. Seeing your account balance go down when markets had a good month, after all, has completely different implications than seeing it go down when the markets had a bad month, right?
So anyway, September was a down month, but in the context of it following 5 straight months of gains, not really that bad...
The S&P 500's five-month winning streak looks to come to an end. pic.twitter.com/s4CS98JvPp— Eddy Elfenbein (@EddyElfenbein) September 29, 2020
Looking at the below numbers holistically, it's pretty clear that the USD was the only winner last month. The Yen, also a "risk-off" currency, likewise had a strong month. Hidden in the modest -3.9% decline of the S&P 500 is the dramatic shift we had early in the month, from hitting fresh all-time highs on September 2nd, to a flight from risk that briefly saw us dip into -10% correction territory.
Just as a month blends erratic daily moves, a year blends erratic monthly moves, as the 4.1% year to date figure for the S&P 500 tells us nothing about the sharp bear market in February/March, that saw it decline almost 35%, or the following period which included the best 100 days on the markets ever. In a proper multi-decade investment strategy, even annual numbers are irrelevant.
As I'm finishing up this post, on the first weekend of October, I've got some pork shoulder in the slow cooker. I haven't used my slow cooker in a while and I found a decent deal on some locally sourced pork shoulder online. I solicited for some tips from friends on Facebook and got a number of opinions, but core among them was "don't take the lid off" (which by that point, 2 hours in, I had already done twice).
I don't think there's a more perfect analogy for long-term investing than slow cooking.
Keep it simple. You probably don't have to add a super-fancy recipe of sauces and marinades to make a delicious pulled pork. I went with the spice rub that the pork came in and added a bit of bbq sauce out of fear it might get dry in the slow-cooker over 8 hours. Your investment strategy also doesn't need to be complex to be good. A simple one-click ETF portfolio, offered by each of the major ETF providers in Canada in a variety of asset class combinations, will get the job done almost as well as a portfolio of individual index ETFs. A fancy actively managed wrap program offered by your bank, at a much higher cost, doesn't get the job done any better, and branching out into all sorts of complex private investments and whatnot doesn't really add that much to the equation.
Stop checking it all the time. One friend on Facebook told me that every time I lift the lid is like subtracting 30 minutes of cooking time. There's nothing to be gained from checking; it's not done yet! What the markets did in the month of September or how much your portfolio went down, according to your statement, also means absolutely nothing. The worst you can do, by checking it, or worse, transacting on it, is add to your "cooking time". Younger investors: it's not done yet! It'll be done when you're retired.
As my friend suggests above, relax and stop worrying. I went for a walk. I'm finishing up this blog post now, and in a few hours it'll be time to make pulled pork sandwiches! Stop worrying about your investments and focus on other things in life. Read a book, work out, earn some money, binge on Netflix, whatever your life's desires are!
Markus Muhs, CFP, CIM
Investment Advisor & Portfolio Manager
*The proper German pronunciation of Muhs is actually more like the animal "moose", just more of an "oooo" sound, as opposed to "ew" for the vowel. Personally, I pronounce it kind of halfway between "muse" and "moose", so more like "muse" but with a sharp s at the end, but I've come to accept "muse" as the common anglified pronunciation, and nobody's called me "moose" since grade 1 in German school.