Proof You Should Ignore The Fear-Driven Investing Headlines

To investors,

The market is trying to figure out the future, which means some people are getting spooked going into today’s July interest rate decision. The Goldman Sachs Panic Index is the highest it has been in two years.

But should you actually be worried about this? It depends on your time horizon. If you are investing for next week or next month, you better pay very close attention to the short-term gyrations of the stock market.

But if you are investing for the long-term, which is probably measured in 5+ year timeframes, then most of what you read in the news will be noise. The fear index doesn’t matter. Today’s interest rate decision doesn’t matter. Neither does September’s decision. Who wins the election in November won’t matter either.

The S&P 500 has an average annual total return over the last 50+ years of more than 10%. Regardless of the details people worried about on a daily basis, the stock market is structurally engineered to go up over decades.

This should give patient investors the confidence to continue being patient.

To understand why the stock market will continue going up, we must understand how fast the US debt has been growing — the national debt has grown nearly 50% since January 2020.

There is no path for us to pay the debt back. Leadership must devalue the dollar to monetize the debt, which means all assets priced in US dollars will continue to appreciate in dollar terms.

For example, the S&P 500 is essentially flat since the early 1970s when it is priced in gold ounces, rather than US dollars. That signals majority of the stock market growth is likely from currency debasement instead of intrinsic value growth.

So what are some of the non-consensus conclusions that I make from this data? First, investors with a long-time horizon should just keep dollar cost averaging into the stock market. Nick Maggiulli literally wrote an entire book called Just Keep Buying that describes this in detail.

Second, the illiquidity of private equity may not be worth the perceived outperformance. You can see in this chart below that private equity investors claim a premium performance over “public stocks.”

But if we use the 11% annual return for private equity since 2000, there is nearly no difference when compared to the 10.83% annual return of the S&P 500 over the last 50 years. This will likely surprise many investors who have been aggressively pouring capital into the private markets (note: I’ve done this too!)

Now there is one caveat worth calling out on this analysis — the best public market investors have done much better than 10.8% annually and the best private market investors capture more than 11%. As with most things in life, the best in an industry do substantially better than the average, but it is hard for investors to know whether they are investing with the best or merely going to get the average market return.

I hope this data and analysis makes you think more critically about where you put your money, along with how to internalize the fear-driven headlines you may read day-to-day. As Warren Buffett so eloquently said, “never bet against America.”

Up and to the right over the long-term. We are so fortunate.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Founder & CEO, Professional Capital Management

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Hany Rashwan on When Countries Will Buy Bitcoin

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