Getting Back to Better

As a dad, I’ve always embraced my inner Tim “The Tool Man” Taylor when it comes to Father’s Day. Whether it’s a new drill, pressure washer, or some other home improvement gadget, I’ve always enjoyed gifts that keep me building. In a way, I enjoy the metaphorical message behind it too: tools give me the ability to enhance the environment that keeps my family safe, warm, and protected. It’s what I’ve always strived to do as a father.  

My goal as a parent has always been to build a better future for my kids, and to give them opportunities that I didn’t have. Whether that’s financial, educational, personal, or whatever it may be. It’s an essential part of my “why.” I think deep down there’s a part of us that wants our kids to be better than we ever were. To me, that’s progress and hope. It’s an innate and immeasurable desire – to want our tomorrow to be better than our today.  

The last several months have been unprecedented, heartbreaking, innovative – choose your adjective. I think it’s safe to say that we’ve experienced a vast range of emotions over the past quarter, with no reprieve yet in sight. Are we better today than we were last month? In some ways, yes. Some vaccines look promising, infection rates have stabilized, and businesses are cautiously opening their doors again. Folks are getting back to work and at a pace far higher than expected. 

But at the same time, we’ve seen social unrest driven by issues that should have been resolved decades ago yet continue to find a foothold in modern America. In some parts of the country, COVID-19 cases seem to be rising. The Federal Reserve, while promising to use “all their available tools,” including keeping interest rates near zero for quite some time, offered a gloomy outlook for the economy in the near term. 

As investors, and as people, we have to ask the question, “Will tomorrow be better than today?” I believe the answer is “yes.” Asking the simple question helps to define and recognize improvement. It highlights the reason markets have historically always gone up. They are a measure of progress.  

Just like the personal growth of our children, progress can be a difficult thing to measure. There’s no door frame for the United States upon which we can write feet and inches. Nor can our development as a country be measured by the number of candles on a birthday cake. Perhaps one lens through which we can view progress is the financial markets. It may not be the best indicator, especially when we zoom in on specific events or time periods, but the correlation is there. As our country grows, so does the economy. 

This line of thinking comes with its hazards, however, especially if we make the mistake of using the markets as a signal for progress instead of progress. We cannot confuse the outcome with the input. If we do, it creates a feedback loop: a self-fulfilling prophecy that leads to overvaluations and bubbles. The markets are going up, and progress is being made. Therefore, the markets should increase further, which means more progress is being made, and so on. Have we seen some of this lately? Time will tell, but it’s entirely possible. 

On a long enough time horizon, the market has always gone up. Every temporary downturn has given way to a longer–lasting increase. Progress is much the same way. If we look at the markets today and ask, “Will tomorrow be better?” the answer may be “yes,’ or it may  be “no.” People love to speculate and gamble on this, but wise investors stretch that line of thinking. Will things be better next week? Next month? Next year? If you have an optimistic outlook, the answer will eventually be “yes.” The Dow Jones Industrial Average was at 850 when I started my investment career in 1978; today it is around 25,000 or about 30 times higher. During that time, we have had wars, inflation, unemployment, unrest, and even pandemics. Over your investment lifetime, you will experience troubles like this, yet the markets move higher.  That’s why we invest. The longer the time horizon, the higher the probability of progress, both in the economy and in the markets. 

We choose to invest in companies with staying power that have stood the test of time. Companies I’m proud to own, even when they may have a stumble. Like my sons, they’re not always perfect. Their progress is not always linear or straight up. But that doesn’t mean I’m going to trade them away. The very thought of that seems laughable, yet many people do it with their “investments” all the time. According to Barron’s, about $9 billion was pulled out of mutual funds in March when prices were down 30% or more, only to see them recover some 30–40% in the next 70 days. Progress and growth aren’t measured over days; they’re measured over years and decades. As a father, I want to share in my kids’ successes and failures. I want to watch them grow, innovate, and discover.  

We’re in a strange place right now – in the markets, in life, even interpersonally. Things are changing in ways no one expected or anticipated. Yet progress is being made. Some of it will be hard–fought, some of it may not even look like progress in the moment. But if we continue to build and believe in a better future, then I think we will get there. It may not be tomorrow or the day after, but eventually, we will find our way back to better.  

To all the Dads out there: Happy Father’s Day!