Market Pulse: Be an optimist
“As you travel on through life brother, whatever be your goal, keep your eye upon the donut and not upon the hole.”
Those words, known as the “Optimist’s Creed,” were printed on the donut boxes, mugs, napkins and walls of Mayflower Coffee Shops, an eastern chain long since gone. Gone yes, but the wisdom of their creed remains.
To investors the donut and hole are easy to see. The donut is a growing economy, rising earnings, record household net worth, larger homes, longer life spans, better health, low inflation, life-altering new technologies and new drugs, and full employment. Times are good.
In the hole are trade problems, record and rising debt at all levels, dysfunction in Washington, and the potential for serious trouble in the Mideast or with North Korea.
Those who focus on the donut buy stocks, especially those companies for whom earnings are expected to rise and with them dividends. Large technology (Microsoft), healthcare (Merck) and consumer staples (Procter & Gamble) companies are among them.
Hole watchers like cash and short-term bonds, some even gold. They don’t like stocks.
Returns from owning stocks far outstrip other asset classes and have through thick and thin, through recessions, wars and high inflation.
Look again at the donut and the hole. The elements in the donut are here and now, and all are evident to even casual observers. We hear about them every day. To focus on the hole is to worry about potential or long-term problems, some not easily grasped.
Will the dust-up with China become a long-lasting trade war? Possible. Will servicing the rising Treasury debt crowd out private borrowers? At some point, yes, but that day would be far over the horizon. Will the dysfunction in Washington become a permanent condition? Hard to imagine, but one can’t be sure. Will today’s pro-investor policies give way to just the opposite? We’ll see.
So as an investor where are you? Are you seeing the donut’s certain or at least very probable positives or the hole’s potential or very long-term negatives?
If the former, history is clearly on your side and there are better days ahead. If to you the potential negatives outweigh today’s and tomorrow’s positives, investment success is tough. The record is clear. Investment success belongs to the optimists.
I, for one, see the donut and like Vanguard Dividend Appreciation ETF (VIG) along with individual stocks Pfizer (PFE), Merck (MRK), Kinder Morgan (KMI), and Verizon (VZ).
All are dividend payers and raisers.
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.