Two the Point — Even a Crystal Ball Wouldn’t Have Helped

A core tenet of our investment philosophy reads as follows:
We start by acknowledging that predicting market performance is extremely difficult. Having thoughtful exposure to various asset classes is the most powerful way to mitigate the behavioral traps that so often lead to poor investment decisions. 
Last week, we were reminded why this is so important. 
On Thursday, October 13, we received the latest reading on inflation in the United States. Prices increased at the fastest rate since June and far outpaced consensus estimates. The conventional wisdom prior to the inflation report was that a hotter-than-expected reading would trigger a significant move lower in the stocks. The reasoning was logical – higher inflation means the Federal Reserve will not deviate from its aggressive rate hiking cycle, leading to slower economic growth and increasing the risk of recession. It couldn’t be simpler. 
However, the market’s reaction did not follow that script. Stocks were up over 1% at the time of this writing (noon on Thursday) and this is the exact opposite reaction everyone expected. So even if you had a perfectly functioning crystal ball and knew the inflation data before it was released, you would have gotten the market reaction woefully incorrect. This is what makes short-term investing so hard, and it is why we put so much emphasis on strategic asset allocation with a focus on long-term objectives.

Stocks Don’t Always Follow the Rules
Source:  Bryn Mawr Trust, Factset