I’ve never liked the way many analysts refer to market headwinds as if they are always negatives. Let me explain. I had the pleasure this summer of going on a sailing trip with two of my boys. We left Newport Harbor and sailed 27 miles to Catalina Island, where we spent a couple days exploring. The trip across the channel took 6 hours, but we weren’t in a hurry. Sailing is all about enjoying the journey. Along the way we saw some wonderful sights, perhaps the highlight was a pod of Orcas that joined us for part of our voyage.
At one point while circling the island we passed an area where the wind increased to 20 mph, which is a stiff breeze for a sailboat. As the boat heeled to starboard and our speed increased, we all got excited. It was an exhilarating ride and a lot of fun. For my son Jayden it was his first time sailing and he was thrilled to see we were actually gaining speed while sailing largely into the wind. I mentioned that on the way home the next day we would likely have direct 20 mph tailwinds, but that we could expect to be travelling much slower due to a phenomenon known as apparent wind. As a sailboat tacks into the wind, the boat’s own speed increases the speed of the wind hitting the sails, creating more lift and pushing it forward faster. When a boat sails with the wind, the speed of the boat causes less apparent wind to fill the sails and it slows down. On our way back to Newport we did indeed have those same strong winds, yet the experience was totally different. As expected, the ride was calm and our speed much slower.
I was speaking with a real estate appraiser some months ago and, referring to the stock market, he said in a negative tone, “With markets at all-time highs there is nothing good to invest in.” It was not a surprising comment given investing was not his profession, but it did give me cause to ponder. I thought about our sailing trip and how we experienced being able to travel faster against the wind than with it. Sometimes the very opposition that we think will slow us down, actually gives a skilled captain the opportunity to speed things up.
Yes, the market is near all-time highs, higher interest rates are threatening, and inflation continues to rear its ugly head. These may seem like headwinds to some investors. Remember though, as with sailing, it isn’t the direction of the wind but the set of the sails that determines your course, and often heading more into the wind can yield even better results. When someone tells you there is nothing good to invest in, maybe they just don’t know how to set the sail for the current economic winds.