“The trend is your friend” is one of Wall Street’s best-known sayings, although the message is incomplete. A more accurate version would be, “The trend is your friend, until the end, when it bends.”
If you are market timing, which we do not recommend, the trick to investing is to be patient through small fluctuations until you can identify the point where the trend makes a change in direction or “bends.” Based on a long experience with markets and investing, good luck with that.
As noted in a recent blog, (see blog dated 2017-11-1), markets are generally subject to a reversion to the mean. In other words, as a relatively short-term measure, the trend can be material. However, over time, valuations above or below the mean, tend to revert to the mean.
Investors are likely to be well served by adopting an investment strategy that recognizes that markets fluctuate, that these fluctuations are very difficult to predict, but the long-term trend has, historically, been positive.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA