How should one judge the quality of an active mutual fund manager? The obvious answer is to look at the results – how has the fund performed? It seems like a simple question, but the answer is not so simple. There are countless ways to measure investment results. What is real and what isn’t?
It has been one of those years thus far. We are in a dark cloud. Inflation has come back; we have an actual war going on; the stock market has gone bear market territory; and the bond market has produced historic losses. So where is that silver lining?
The market has a case of the glass-half-empties. Earnings have been mostly good, but the market would rather focus on the few negatives. Underlying all of this is slowing economic growth and high inflation, combining to take the market roughly back to the lows we had seen earlier this year. We are now at a turning point.
These days, every time a Fed member speaks, the financial press and short-term traders parse every single word. The market is trying to rally and come back from the correction of earlier this year, but every time we start to make serious progress, some Fed official insists on stepping in front of a microphone.
Eventually the fog lifts and the world reappears. When it does, there are opportunities for investors. Prudent investing is really simple but extremely difficult, because the best time to buy is when everyone else wants to sell, and the best time to sell is when everyone else wants to buy. That takes discipline.
