Think of the stock market as an interminable struggle between fear and greed. Keeping one’s wits, understanding the effects of crowds moving into and out of ideas, the treachery of group think, and the erosive impact greed can have on total return is imperative to survival, writes Nancy Tengler, CIO at Laffer Tengler Investments.

Of all the attributes that can impact an investor’s total return, however, greed is by far the worst. I worked with a young investor who was always swinging for the fences. He was the homerun king on his college baseball team he told me.

What was your batting average, I asked? 200 was the answer. That style may have a place in baseball but not in investing. Singles and doubles are instrumental in producing above average long-term total returns.

As I have said so many times: investing is about being mostly right. An occasional homerun is welcome but the constant, overriding quest for glory has no place in our business. Greed is indeed a bottomless pit of striving, without achieving the goal of sustainable total return.

Meanwhile, are we facing a hard landing, soft landing or “no landing?” No one really knows and there are very smart people advocating for each scenario. But we have been consistent in our view that:

  1. The Fed’s protracted policy error allowed inflation to evolve from a slow burn into a wildfire
  2. Inflation peaked in June of 2022 and rolled over (which is not to say the next 3% decline is going to be easy or soon)
  3. We are likely to experience a mild recession signaled by the severely inverted yield curve and 10-months of negative readings for the Leading Economic Indicators
  4. It was time to begin adding risk back into portfolios in Q4, 2022 because the market looks forward and we were closer to the end of Fed rate hikes than the beginning.

Earnings have also come in better than our expectations in the companies we own. This confirms what we know. Great management teams can navigate difficult economic environments and always come out stronger on the other side.

So, in the face of ongoing volatility we are patient, waiting for the right pitch as others swing for the fence. Because, after almost 40 years in this business, we know two things for certain: Volatility is the friend of the long-term investor and every bear market is eventually followed by a bull market.

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