"Hissy Fits in Both Directions"

image: Wikimedia commons (link).

The algorithmic market in which we live:
We have been seeing bouts of wild volatility -- in both directions -- separated by periods where markets go basically nowhere. It is clear that there is no fundamental reason behind this behavior but rather the fact that the humans have basically handed over control to algorithms, like a Tesla-owner letting go of the steering wheel, but the auto-pilot doesn't drive very effectively.
Fed rules the world?
In our many decades of professional investment management, it never ceases to amaze us how the markets hang on every word from the Fed. Last we checked, the Fed wasn't in charge of any of the businesses we own for our clients.
Hissy fits in both directions:
The conventional wisdom and various media market commentators are spewing out memes which are shallow and not well-informed, from "small-caps will get hurt in this environment" to "value is outperforming growth today" to the general "risk on: risk off." If you are trying to manage capital based on chasing those kinds of ignorance, heaven help you. We follow the mantra: "Be centered, be still." On days of non-fundamental volatility, we typically wouldn't make any changes.
Everyone is pushing portfolio management "into a box"
They want to categorize companies -- and managers -- into little boxes and try to guess which category is going to go up today. Why would anyone want to be so reductive and shallow? Because no one wants to make investment decisions based on business fundamentals anymore! This situation provides an opportunity for those who are willing to take the time and effort to do the fundamental work.

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.

Continue Reading