Mauboussin on Strategy: Where from Here?

This short essay covers three topics. First is a little perspective on recent events. Second are some thoughts on where we might go from here. And finally, a comment on the behavioral finance issues around what we are going through, with an emphasis on why it’s so hard to act in this type of an environment.

It’s important to open with a disclaimer that you should be circumspect about what we, or anyone else, have to say about the past, present or future. We humans tend to suffer from hindsight bias—we think we had more foresight than we did—and our predictions are frequently off the mark. So the goal here is not to make any predictions, but rather to point out salient features of what is going on and what those features might mean for the market.

To summarize, we believe this will prove to be a good time—and maybe even a great time—to invest for people with time horizons beyond a year or two. While there’s no way to know where the market will be in the short term, many conditions are in place for better performance. More directly, we believe the market at these levels represents substantial value for long-term investors.