“How come my Financial Zen portfolio’s down 2% over the last two days after such a great July?”
“The Fed and ECB both raised rates within the last week,” I responded.
I could have added any other headline – earnings, too GOOD of an employment report, Fitch downgrading the US credit rating.
“But really,” I continued, “Mr. Market needed a break. He ran hard in July – and all of this year for that matter – so he needed a little rest.”
My mentor taught me to think of “market action” that way.
Personify the markets. (He used Benjamin Graham’s “Mr. Market.”)
Then imagine Mr. Market’s entire life was just a never-ending marathon. From sun up to sun down, his job is to run.
But every now and then he’ll need a break.
The financial news will link his breaks to something negative happening in the headlines and sometimes he does use the headlines as an excuse to take breaks.
But correlation isn’t causation.
He really just needed a break.
He’ll be back in 10 minutes.
