Jeff Sommer Faces the Fog of Stock Market Uncertainty

Jeff Sommer at The New York Times faced the fog of stock-market uncertainty, and readers attacked him for it. But he wasn’t wrong. The stock market is uncertain, which is why you need a system.

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Jeff Sommer Faces the Fog

In his July 14 installment, “How to Invest When Inflation Is Bad and a Recession May Loom,” New York Times columnist Jeff Sommer summarized the recent pressures on the stock market, including inflation and the Federal Reserve’s balancing act of trying to squash it without sending the economy into recession.

Then he granted readers the investing advice they’d been requesting. He made clear upfront that, like everybody else, he didn’t know where stocks were heading:

“Readers have been asking for advice, and I’ll try to help. Don’t be under any illusions, though. I don’t know where the markets or the economy are heading short term. Nor does anybody else. As uncomfortable as it may be, we must proceed without that knowledge.”

He sprinkled throughout his article nods to the inherent uncertainty of stocks:

“If ever there were a time to do so, this is it, because even close study of incoming economic and financial data isn’t providing useful guidance.”

“What’s the trend for the next six months? There are many answers but, at bottom, nobody knows.”

“I’ve been saying since April that inflation may be near its peak, and it’s possible that this premature statement is actually true now.”

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Readers Disliked the Uncertainty

The stock market’s inherent uncertainty, acknowledged by Sommer, did not sit well with some readers. In the comments section, they complained:

Audrey in Germany:
“Well, there’s 5 minutes I just wasted expecting to find something useful. Let me sum it up for you and save you time: ‘No one knows. It could be this or that.’”

Chris in Fort Collins, CO:
“Frankly there is little advice here. Mostly a summary of the situation that has developed over the past six months, which boils down to ‘We don’t have a clue what’s going on.’”

Robert Fabbricatore in Altamonte Springs, FL:
“Clear as mud. … in the stock market, if I have a great stock, it can still plummet if the sector goes down.”

Citygirl Somewhere Out West:
“I found that this article didn’t say much of anything.”

Jack Cheevers in Oakland, CA:
“I read this column so you don’t have to. Here’s the very scanty, very typical advice: buy diversified stock funds, and buy bonds. There you go!”

Chip in the USA:
“For me, the takeaway from this article is the outright insanity of expecting ordinary non-expert people to ‘plan for their retirement’ on the basis of tea leaves, mumbo jumbo, and well… ‘luck’ for lack of a better word.”

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But Sommer Was Right

What did readers expect, that Sommer would present an exact roadmap of the stock market’s future with perfect picks to maximize its profits?

Of course he couldn’t do that. Instead, he did the best anybody can do who writes a general financial column for a general audience, rather than offering (mostly useless) trading tips to traders. He reminded them of the wisdom of sticking with a disciplined investing plan in low-cost index funds in the basic asset classes:

“…if you are starting as an investor and have decades ahead, take the long view. Put your money in low-cost, diversified index funds — including workplace target-date funds—that track the entire stock market. Add diversified bond index funds as you age.”

Nothing wrong with that.

For short-termers who made the mistake of taking money they need soon and investing it in stocks, he wrote that the situation was trickier but offered this:

“If the economy were to fall into a prolonged and deep recession, the stock market might plunge further and not recover for some time. Preparing for that eventuality may mean reducing your stock allocation—even now, after the market has fallen—if you will need to use the money soon.”

He suggested ratcheting down risk with bonds, then concluded:

“Find the mix of diversified stock and bond funds that works for you, depending on where you are in life. The economic news may be terrible, but with a little luck and a lot of planning, you can ride it out.”

This is correct, and it’s always correct.

Frustrated investors should not blame the messenger for relaying a truism. The stock market is inherently uncertain, and the best that long-term investors can do is contribute steadily to the types of funds Sommer recommended.

Any regular, periodic plan of contributing money to the fluctuating price of a stock fund will work over the long haul: dollar-cost averaging, value averaging, Twinvest, or The Kelly Letter’s signal system (an improved version of value averaging).

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Links to Resources Mentioned

 

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2 Comments

  1. Chad
    Posted July 28, 2022 at 11:08 am | Permalink

    Hi Jason,

    I am really enjoying the mid week podcast. Now you got me looking forward to it every Wednesday. Thank you Jason!

    Chad

    • Posted July 28, 2022 at 11:49 am | Permalink

      You’re welcome, Chad, and thank you for looking forward to it! Jason

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