🚨Public Service Announcement: Keep politics out of your portfolio.
The presidential election is just days away. Emotions are running high and will continue to beyond election day. Whether “your” candidate wins or loses, let me warn you, once again, against mixing politics and your portfolio.
Howard Marks, the famed value investor and founder of Oaktree Capital Management (which was a long-time Vanguard sub-adviser until recently), literally wrote the book on market cycles. However, it was in his other book, The Most Important Thing, that he commented:
… while we never know where we’re going, we ought to know where we are. We can infer where markets stand in their cycle from the behavior of those around us. When other investors are unworried, we should be cautious; when investors are panicked, we should turn aggressive.
Far be it from me to argue with Marks, but he makes it sound so easy. I’m sorry, but knowing where we are in the cycle isn’t always obvious.
For instance, large growth stocks dominated the market in 2023 and the first half of 2024. They seemed unstoppable. Then, in the third quarter, the cycle turned as Value Index (VVIAX) outpaced Growth Index (VIGAX) 9.4% to 2.9%. Also, small stocks outpaced larger ones, with SmallCap Index (VSMAX) besting 500 Index (VFIAX) 9.0% to 5.9%. And the long-time leading tech stocks in Information Technology ETF (VGT) only gained 1.9%.
So, was the third quarter the changing of the market-cycle guard?