March Client Letter: The Market’s Response to Crisis

Below, a snippet from my latest letter to Ritholtz Wealth Management clients…

One of the questions we get repeatedly from clients is about the potential for a crisis and how it will affect their portfolios. It’s a perfectly rational question and completely in-line with how our brains have evolved to think. Our fear of the unknown – and the related ability to make plans for it – is one of the main reasons for the success of our species these last hundred thousand years.

In the context of investing, the fear of a sudden event happening can be unhealthy and counterproductive if we allow our imaginations to run wild. By definition, a crisis is a surprise of sorts – for if it had been adequately foreseen, preparations would have been such that it would not have occurred in the first place.

At Ritholtz Wealth Management, we do not spend a lot of time attempting to divine the nature and timing of the next crisis. For one thing, we know from history (and present) that no one can actually do this, at least not more than once. For another, even if we could pinpoint the coming of a major event, we’d be unable to take the next step further and predict precisely what the market’s response might be.

If you’re interested in learning more about our practice and how we work with investors, get in touch!