“We are overreacting because if it looks like you’re overreacting, you’re probably doing the right thing”

“We are overreacting because if it looks like you’re overreacting, you’re probably doing the right thing.”

That’s National Institute of Allergy and Infectious Diseases Director Anthony Fauci on Sunday, March 15th.

He is, of course, speaking about the health crisis, but I think there is an investment and business corollary to this that is important to mention.

The US stock market has just completed the best 50-day period of returns, well, ever. The best fifty days of all time. It’s in the books as of yesterday’s close. Stocks have gained 39.6% from March 23rd according to LPL’s Ryan Detrick, an unrivaled run for the ages.

Does that mean that anything you did in March to hedge your portfolio was wrong? Or that anything you did to try to protect your business was wrong? Only if you possessed a time machine and knew what the stock market would look like by June. And, or course, no one did.

One concept that had been repeated again and again by Dr. Fauci, Dr. Birx, Governor Cuomo, etc was that if we’re successful, it will look like we overreacted in hindsight.

I think the same could be said for investors and business owners who did what they thought they had to in the early stages. If you sold 10% of your stocks in late March in order to better sleep at night, it’s not relevant to look at the last fifty days and then say “That was a mistake.” Not necessarily, it wasn’t. You did what you needed to do to make it to now.

I feel the same way about some decisions I made with my household’s finances and on behalf of my firm. I didn’t expect the best fifty day stock market of all time to be the end result of the worst pandemic in 100 years. I can’t go back in time to tell myself what things are like now.

We are always either over- or under-reacting to new situations and events during the course of our lifetimes. We cannot ever know what will be fifty days out, let alone five months or five years later. Let’s not judge our past selves during times of crisis too harshly from our perches in the present. You’re working with imperfect information, you do your best.

What's been said:

Discussions found on the web