Thinking & Thoughts

“Nothing in life is as important as you think it is while you are thinking about it.” – Daniel Kahneman

I have a tendency to think a lot. Finding most things fascinating, it doesn’t take much to get me started thinking about anything. There really is magic in almost every aspect of existence. Granted, when I start thinking about something my body may be doing at some random instance, such as if I feel a little point of pain or have a temporary skin discoloration, then Libby and Craig like to make fun of me. They over-dramatize my statements and brand me a hypochondriac. Truthfully though, I just like to think about things, even if that’s just my body’s small quirks.

What I truly love to think about, though, is people… especially their thoughts and behaviors. When you get down to it, we are a weird bunch. One subject I’ve been really focused on recently is to what extent my personal thoughts and way of thinking have changed as I’ve aged… and then thinking about that in terms of people in general. I’m obviously growing older (46), but I’m at a point in my life where I have some bit of experience, and yet I haven’t fully put my foot down to state, “that’s because I’m right and you’re wrong and that’s all there is to it.”

Some of you may know that I help out a lot at my church, especially with the youth because of my son, Carter, who is now 9. Of course, I get a lot of time experiencing the thinking of that age group at home, and I also teach the 5th through 8th grade Sunday school class. I get a good bit of interaction with the 9th through 12th graders as well, and we have a campus ministry, so I occasionally get to see what the college crowd is up to. And as you know, I work with many people around my own age and older, including those well into their 80s and 90s. I truthfully appreciate, highly value, and simply enjoy all these cross-generational perspectives, relationships, and interactions. There is a lot of psychological research on how beneficial these kinds of relationships can be, and I fully vouch for and recommend them to everyone.

So, pardon my rambling, but I am making my way to how all this relates to investing. You’ve probably noticed that the markets have recently started a southernly trend. I believe the main reason for this is because the news has told us it should happen. But, the media’s biggest “reason” is that it is due to a decreased probability for whatever number of FED rate cuts each organization had previously “guessed” could happen in 2024. However, I do think the recent attack on Israel by Iran has added to the uncertainty.
I don’t know if this is the beginning of a continued market decline. As I’ve said previously, the market as a whole is expensive right now, but on a broader individual level plenty of companies are not. And here’s where the cross-generational relationships I’ve experienced have given me some good advice. Whether we are 9 years old or 90, the more of us who discuss anything in a negative light, the greater our tendency to continue that negative focus and feel pessimistic about the future.

I just read an article noting that small business optimism is at its lowest point since 2012, with 27 months in a row of declining scores. That time period does, however, include a time when the government completely shut down most businesses and the viability of life was not a given. And while I am not blind to the fact that inflation can be much harder on small businesses than it is on large ones, I still believe those figures can be partly explained by the power of pessimism on our perspectives.

Do you know what I’ve seen to be the cure for this tendency to snowball our negative thoughts and outlook of the future? In almost every case, and again whether we are 9 or 90, it begins with just one person quoting from experience something along the lines of, “times are tough, but they could be worse, and they always get better.” This can completely turn things around and increase the propensity for more positive thoughts and views of the future. I recently did one of my Intelligent Investing radio shows on the power that older folks at the water cooler have for influencing proper investment behavior in the younger generations. They do this just by being an example of someone who didn’t sell during a panic and continued to invest for the future. Voicing your positive opinions, even if it means having to speak out against the current tide of the conversation, is more valuable than we tend to give credence to.

Here is my optimistic summary of the current investment environment. Even with some parts of the market being overvalued today, many companies are within normal valuation ranges. FactSet is projecting significant corporate earnings and revenue growth for the 1st Quarter of 2024, the full year of 2024, and for 2025. The U.S. economy continues to hold its place of strength in the world, and despite the sum of ongoing inflation and political complaints, 2024 GDP projections have been increased by the Federal Reserve to 2.1%. Despite the growing credit card balances and default rates, high mortgage rates and low home supply, consumer confidence continues to remain high, and even with the headlining corporate layoffs, the labor force and employment situation remain strong.

Investment sentiment will always remain a fickle thing, ready to drift along with any fantasy… but the current fundamental situation is not the setting for any specific nightmare.

I’ll end with a couple of relevant quotes by the author of the initial quote I shared, Dr. Daniel Kahneman. Mr. Kahneman was one of the founders of behavioral finance and received the Nobel Prize in Economics in 2002.

Optimistic people play a disproportionate role in shaping our lives. Their decisions make a difference; they are inventors, entrepreneurs, political and military leaders – not average people. They got to where they are by seeking challenges and taking risks.

It’s a wonderful thing to be optimistic. It keeps you healthy and it keeps you resilient.

As usual, we always love hearing from all of you. Our phones are ready to be answered, and our doors are open. Your questions and concerns are never a burden to us, so let us know what we can do for you. I hope you are all enjoying the beautiful days we’ve been having.

Take care,

Justin Anderson