Financial Awareness. Does History Repeat?

Author

Simplify Wall Street
September 22, 2024

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Good Evening!

I am currently in the mountains of Charlottesville, VA with limited WiFi connection so I want to be brief, but helpful.

How many of our readers were surprised by the 50 bps rate hike last week by the Fed? If so, how many times have we preached to expect all scenarios? Awareness and attention to detail is what separates those who find success and those who plato. By showing awareness in the market or economy you will have a plan A and a Plan B for your financial goals.

I have a partner who wakes up every morning and checks his bank accounts. EVERYDAY! Yet, this can be overly excessive my point is some people don’t review their accounts until tax time! If you don’t track spending and where your money is going how do you expect to know your spending tendencies. This lesson carries over to the investing world because every investor has tendencies. Do you get anxious when stocks are volatile? Do you find yourself only buying more stocks when the market is doing well?

Track your tendencies because the market makers, fed and businesses are tracking your tendencies daily. Some may say they know you better than you know yourself. Think on that for a second…

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Wrap up

History doesn’t Repeat. It Rhymes.

When a specific political party doesn’t win, the market’s reaction can’t be assumed.

There may have been a time when the market went up and down after the Democrats took office. In fact, if you look at history, the data also says this statement is false.

The phrase “history doesn’t repeat, but it often rhymes” speaks volumes when analyzing the stock market. While exact patterns rarely mirror past events, certain behaviors and market conditions often show similarities, offering insights into future trends.

Take the dot-com bubble of the late '90s and the recent surge in tech stocks. Both periods saw rapid technological advancements and investor optimism. In the '90s, internet startups promised the future, much like today’s excitement around AI and cryptocurrencies. Investors poured money into companies with unproven business models, fueling bubbles. The patterns of hype and overvaluation are comparable, even if the technology driving them differs.

However, the key is recognizing what’s rhyming. Tech stocks today may seem frothy, but unlike the dot-com era, many companies are generating revenue and profits. The market is more mature, yet exuberance can still lead to volatility.

Understanding these rhymes helps investors navigate the market. While history doesn’t offer a crystal ball, its echoes provide clues for wiser decision-making. Learn the lessons, spot the trends, and stay grounded as you move forward.

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