Lawyers are trained to read everything. To find the issue buried in the footnotes. To never let a document go unanalyzed.
That instinct makes you exceptional at your job. In investing, it can work against you.
The financial news cycle is designed to create urgency — conflict in the Middle East and its impact on oil, inflation data, Fed minutes, earnings surprises, analyst upgrades and downgrades. There is always something demanding your attention, always a reason to act.
But the actual story of long-term wealth creation through equities is almost absurdly simple.
Below is 125 years of data. Two lines: the value of the S&P 500 Index and the level of S&P 500 Earnings.
S&P 500 Index vs S&P 500 Index Earnings
Data source: https://shillerdata.com/
You can say a lot about what that chart shows. But over the long-term the core of it comes down to this:
Earnings grow
Stock prices follow
That’s it. That’s the story. It has survived two World Wars, the Great Depression, the dot-com collapse, the financial crisis, a global pandemic, and every news cycle that felt like the end of the world at the time.
The noise is real. The story underneath it is older and more durable than any of it.
Stick to your plan. If you don’t have one, call me.
Tim
