In 2015 anxious anticipation of a Fed rate hike by investors sparked a cascade of events.  Volatility has exposed some fissures in the world economy, calling on investors to exercise patience.  Volatility also shined a light on the performance shortfall of some of the world’s biggest and best remunerated hedge fund managers.

In 2015, Volatility from a Phantom Rate Hike.  The anxious anticipation of a Fed rate hike by investors throughout the world sparked a cascade of events, all inextricably linked.  That markets have moved so significantly on the prospect of a Fed hike exposes the fragility of the global financial system. Pimco offers five primary investment implications and lessons for investors from this year’s tumult.  The first lesson is that rates are likely to stay lower for longer.

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The Patience Principle.  The greatest contribution you can make to your long-term wealth is the exercise of patience. Stock market returns are rarely delivered in an even pattern.  During periods of volatility a longer-term perspective is required.   Investors must “go with the flow” to achieve market averages.  Ultimately, what drives your return is how you allocate your capital across different assets, how much you invest over time, and the power of compounding.

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Stock pickers fail to shine in downturn.  It is easy to look smart when the equity market is soaring.  The time when stock pickers really shine is when markets take a turn for the worse—or so they claim.  Based on public filings by the world’s biggest and best remunerated hedge fund managers, the evidence suggests not. 

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J. Mark Nickell & Co.

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