The Sin of Complacency – July 2017
“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”- Sir John Templeton
When the current bull market finally breathes its last, we may have to amend Mr. Templeton’s famous quote to include, “…die on euphoria or complacency.” Current valuations would suggest that equity markets are in a state of euphoria. Having fresh memories of the last two euphoria-driven equity bubbles, we know what to look for. The S&P 500 is in its 100th month of a bull market–the second longest since 1926. Complacency easily takes root in a market environment which hasn’t undergone a 20% correction since 2009. Despite being nearly as expensive, this market feels different to us. While there’s no desperation to own stocks, there is a profound sense of complacency among investors as to what they own. For some there may be a certain solace in such detachment, but we remain committed to knowing what we own and vigilant in understanding what companies are worth.
In this edition of our Investment Perspectives we will discuss some of the more poignant factors currently affecting the markets. The topics we have chosen stem from both our recent meetings with many of you, as well as from those issues dominating the headlines and impacting investor behavior. As always, we will endeavor to relate these issues to our own investment process and provide you with insight into how we adapt to an ever-changing environment in the stewardship of your wealth.
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