Analogy for the Current Market Environment


John Micklitsch, CFA CAIA, President & Chief Investment Officer

We have had a few conversations lately in which people have asked what we think is going on with the markets right now. In answering this question, an analogy that seems particularly fitting is to compare the current market environment to driving a car with one foot on the gas and one foot on the brake at the same time. The car kind of lurches around with the two forces fighting against each other. In this instance:

  • The gas pedal can be viewed as the strength of the global economy, tax cuts and solid underlying corporate earnings (both public and private).
  • The brake pedal on the other hand, can be viewed as inflation/rate cycle concerns, tariff/trade war fears, Administration firings, Facebook headlines, etc.

Eventually however, engines are more powerful than brakes, which is a twist on Ben Graham & Warren Buffett’s famous saying that, “in the short run the market is a voting machine, in the long run it is a weighing machine”.

Bottom line, eventually the solid underlying fundamentals should provide directional leadership to the equity markets but it appears we may have to lurch around in the car for a bit until it can break free.

As always, if you have any questions, please don’t hesitate to contact your Ancora team.

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