What do the Yankees and the stock market have in common?
The start of baseball season brings with it warmer weather, later sunsets, carefree days...and the inevitable obsession with the statistics covering every aspect of the game and it’s players. So what can analyzing America’s favorite pastime possibly teach us about the financial markets?
@ESPNStatsInfo tweeted on April 9th that Giancarlo Stanton struck out more in the last week (16 times) than Joe DiMaggio did in the entire 1941 season (13 times). Say What?
With their acquisition of Giancarlo, the Yankees doubled up on their outfield skill, pairing him with Aaron Judge. On paper, these two mammoth players standing at 6’6” and 6’7” present what could possibly be the most imposing defense in the MLB. Not only that, the Judge/Giancarlo dynamic at bat brought the promise of back-to-back power hitters that would pose a threat too great for most pitchers to overcome. If only things played out on the diamond as they looked on paper.
The Yankees bet on Giancarlo delivering against these promises with a whopping $25 million per year salary. Instead, he has delivered sub-par results to date, with his .241 average, 23 strikeouts and only 3 homeruns (as of April 12th) and uncharacteristic botched plays in the outfield.
So what is Aaron Boone, the Yankees manager to do? Bench him? Tell him to choke up and punch a few singles to right field a la Derek Jeter (who of course traded Giancarlo to the Yankees)? No. Aaron Boone should continue to pencil Giancarlo in the lineup, confident that his fundamentally sound star will at some point this season perform to the standards the gifted slugger has shown throughout his impressive career.
Several investors have told us they are starting to feel uneasy with the Giancarlo Stanton like negative performance of the stock market in 2018. Indeed, the first quarter of 2018 was the first time the S&P 500 recorded a negative quarter since Q3 of 2015.
As an investor, what factors should you be considering? Following is our game plan – tell us what you think @jimparkscfp.
Focus on the Prize
If your objective is to use your investments many years in the future for important goals such as college education, retirement income or a beach house in 15 years, you may have the time to allow for the inevitable volatility and negative periods of performance. Giancarlo and Aaron Boone know it’s a long season, as you should remind yourself of this too.
Review the Fundamentals
In Giancarlo’s case, surely Aaron Boone is comforted by his 267 home runs and 672 RBIs during his 8 year stint with the Marlins. We feel you can be reassured that according to @LPLResearch,
- Their favorite leading economic indicators suggest a low probability of recession in the year.
- Expectations are for double digit earnings gains throughout 2018.
- S&P 500 price to earnings ratios at current levels are well supported.\
Stay the course
The investments that make up your financial plan should reflect your goals, and being properly diversified can help even out your exposures to negatively performing markets or sectors. At Parks Wealth Management, assessing your risk tolerances and time horizons helps us to develop a soundly diversified portfolio to help you pursue your goals over time and through different market cycles. The jury is still out on if the Yankee’s bet on doubling up one on skillset will pay off. Boone may continue to have a diversification issue on his hands instead of doubling their firepower as was the expectation.
As Warren Buffet, a famous baseball fan put it, “the stock market is a no-called-strike game. You don't have to swing at everything - you can wait for your pitch.” We understand that down markets can be worrisome and encourage you to get in touch should you have any questions or concerns we can address.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.