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Flavor of the Week

Some sayings just take us back to certain memories. They allow us to remember certain instances from the past. 

The saying “flavor of the week” is one of those. It takes me back to those hot summer days and hustling over to either Cold Stone or possibly TCBY.

Some weeks, my flavor choice would be a sorbet (the weeks I was trying to not feel guilty about ice cream). Other weeks, it would be plain Jane Vanilla. And nowadays, I find that coffee flavor has entered the rotation (my palate has become so mature in recent years!).

But the flavor of the week came and went. Ultimately, I would revert back to ole’ reliable mint chocolate chip. This flavor always worked for me, it always ended up making the ice cream experience a good one (and still does).

Flavor of the Week: Cantor & ISIS

Within the investing world flavor of the week could be deemed just headline of the week. They change as often as we change our ice cream flavor of the week.

This past week, markets got news that made them uncertain, made them uneasy. Investors don’t do well with uncertainty and they tend to get scared.

We were moving along quite nicely as Washington wasn’t causing many headwinds, finally. Then, Eric Cantor lost in a primary election causing outlooks to change. This wasn’t expected.

Now eyes have shifted back to the Capitol of chaos and uncertainty about mid-term elections and pending legislation has left investors uneasy.

The cherry on top this week was Iraq’s growing civil war. Before last week, many people believed ISIS was just a Greek goddess we learned about in grade school, but now we relate it to the militant group trying to take over Iraq.

More global conflict has caused investors to be uneasy and now the uncertainty that comes with where oil prices could go because of current conflict leads to people being more uncertain with domestic growth. Because the possibility of higher oil prices means less discretionary spending by individuals which then can cause slower economic growth. Prior predictions on growth have to be adjusted again. This is uncertainty. Not a good thing for investing.

The Final Bite

Remember the VIX index we talked about last week? We talked about how it has been extremely low. Well, the uncertainty caused it to jump nearly 15% during the height of the headlines before settling down towards the end of the week.

Flavors of the week come and go, but it doesn’t ultimately shape our longer term favorites. The same is true for headline risk within the investing world.

Much of our time is spent talking about this because investing is a psychological battle. Keeping ourselves from reacting to short term problems in order to stay true to our longer term goals is the key. Making a mistake because of short term risks causes longer term goals to become less attainable.

The markets have had their own flavors of the week in recent memory: Ukraine and Russia, China’s slower growth, North Korea, Spain and Greece, Obamacare, Debt Ceiling debates, government shutdowns, and on and on.

But the long term fact is that through these recent flavors of the week, and even the older ones going back decades or centuries, is that markets find a way to prevail.

 

And that’s the Mint Chocolate Chip for me, the ole’ reliable, the long-standing truth.

(All data used within The Capital Course was provided by Ned Davis Research)


 

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