“Steady as she goes” is a common nautical phrase used when maintaining current course. The command says nothing about a ship’s current surroundings; it can be issued in the calmest of seas or in the most brutal of storms. While the command means to maintain the status quo, it does not mean to drop guard and settle into careless complacency. Vigilance is always paramount while at the helm, as identifying hazardous developments is of the utmost importance. Foresight is equally crucial, as a prompt, and more importantly, proper response to any perilous changes could mean the difference between foundering and continuing forward.
Since the election, a tightly wound balance between investor hope and fear has driven markets. Market valuations are influenced by a combination of fundamentals and investor sentiment. When emotions overshoot fundamentals, that’s when opportunity, or risk, can emerge. The first quarter opened with post-election momentum continuing to propel US markets to new highs, but the pace tempered late in the quarter with the realization that implementing President Trump’s pro-growth agenda would face potentially significant obstacles. The release of less-robust-than-expected economic data compounded this slowdown. Nonetheless, positive investor sentiment, the so-called “soft data,” continued to buoy the market overall.
When heading to a destination, many turn to Google Maps or other GPS apps for turn-by-turn directions. You have advance notice of turns, left-hand exits, and even accidents or road construction. Should you miss a turn, they recalculate your journey without judgment. No such reliable guide exists for investors, as the future of markets is impossible to map.