Waves, Weather, and Warning Signs

Rain probability: 90%. And for four days straight over the Easter holidays. Seriously? That’s the kind of forecast that brings Mark Twain to mind:

I have been through some terrible things in my life, some of which actually happened.

So: no use worrying about things that might turn out differently anyway. And as it happened – despite storm warnings and a low-pressure system over Italy – the region of Marche was largely spared. It wasn’t as warm in Sirolo as it was back in Vienna, but the kids still played their game of “catch the waves” on the beach (spoiler alert: the waves won), and we got to do everything we’d planned. And let’s be honest – the Italian way of life doesn’t depend on the weather. Basta!

Right now, the forecast for the stock market isn’t all that sunny either. Personally, I feel like we’ve already had our fair share of rain lately – but the market keeps doing its own thing. Just as a gloomy weather report can turn into local sunshine, a market downturn deserves a closer look. It’s precisely these emotionally tough phases that lay the groundwork for future outperformance.

Market gloom as market luck

In bear markets, it often takes a wave of investors throwing in the towel – including those holding solid stocks – before the market finds a bottom. The back-and-forth in prices can feel unsettling. But when expectations are in the basement and headlines are grim, the next upswing is often already taking shape.

At the Chief Investment Office, we believe this nerve-wracking environment will stick around for a while. So why not just sell and get back in later, you ask? Sigh. I’ve written quite a bit about that in the Gutmann Viewpoint over the years. Anyone selling now, hoping to jump back in at just the right moment, will likely find themselves waving goodbye to the departing train.

Because often, the turnaround comes out of nowhere. Just look at April 9th, 2025 – the U.S. equity market jumped nearly 10% in a single day! Miss that, and you’re left standing on the platform.

And one more thing: weak prices are also a stroke of stock market luck. They give you a chance to buy more at better prices. And for those – like me – who are fully invested, it’s good news when companies buy back their own shares at attractive levels. Or, to borrow the words of J.P. Morgan, the most influential private banker of his time:

In bear markets, stocks return to their rightful owners.