It’s hard to believe that it has been exactly one year since the market hit its low during the financial crisis. The recovery off the March 2008 low has been one of the strongest rebounds on record which is a reflection of how low the market had been driven by investors’ fear. Since September of 2008, the market has been stuck in a fairly tight trading range. This is also a reflection of how investors’ emotions are reflected in market action.
The economic data clearly indicates that the recession is over, but it is not clear how strong the recovery will be. For the last several months, every good data point seems to have an offsetting negative piece of news. The lack of conviction on the part of investors is seen in the up and down action that defines the trading range.
One of the toughest parts of managing money is trying to take the emotion out of investment decisions. Laura and I spend a lot of time testing each others ideas and positions. It’s the only way to make good decisions when you are stuck in an emotional trading range.
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