College Basketball, The Weather, and The Markets

What do all three of the above have in common? Volatility and unexpected outcomes. I would suspect that’s an easy answer for most of you. The aptly named March Madness basketball tournament is certainly in full swing (ouch UVA!), snow is expected on the first day of Spring (that’s today!), and the markets continue to remind us that they can go both up and down (often in the same day!).

The NCAA Men’s March Madness basketball tournament has been predictably unpredictable as usual. Most shockingly, and for the first time in the history of the tournament, a #16 seed (the highest possible seed) defeated a #1 seed when UMBC downed UVA. If you predicted that one, you’re either lying or your entire family went to UMBC! Speaking of family, shout out to my sister-in-law, Kaylyn, who works at UMBC. While I have lots of very disappointed friends who attended UVA, it is fun to have a very loose connection to the school responsible for one of the biggest upsets in college basketball history. 😊

Some amazing statistics from ESPN’s Darren Rovell via Twitter (@darrenrovell):

  • 0: Number of brackets on ESPN, out of 17.3 million, that got all Sweet 16 teams correct
  • 3: Number of brackets on ESPN that got 15 of 16 Sweet 16 teams correct
  • 62,559: Number of brackets on ESPN that did not get a single Sweet 16 team correct

How to handle the unpredictability of March Madness: I have no idea! Maybe consult the nearest 8-year-old and have him or her choose based on favorite mascot? I can say from experience that exhaustive research does not help.

The weather has been no less predictable. In the DC area alone, we have had extreme wind, unusual cold, and a coming snow storm that actually isn’t that late in the year by historical standards. Based on other weather events that have occurred throughout our country, I would say we have been fairly fortunate. I found an interesting chart from the Capital Weather Gang at The Washington Post that lists the earliest and latest snowfalls in D.C. This is from 2015, so maybe some of these have changed, but I doubt it.

Capital Weather Gang: The Washington Post

How to handle the unpredictability of the weather: Layers and a decent (wind resistant) umbrella!

Lastly, (and predictably!) I will address the volatility of the markets. There have been some large swings this year, and with the exception of a one-day 1000-point drop in the Dow Jones Industrial Average, nothing out of the ordinary. Another quick question: Do you think the S&P 500 is up or down for the year? Because of all the doom and gloom that seems to prevail in the news, many might say the S&P is down for the year. It’s actually up about 3.3% as I write this.

Trying to pick the direction of equity markets on a given day, month, or year is a lot like trying to correctly fill out your March Madness bracket, impossible. However, unlike your brackets, there are some time-tested truths that can help you the investor. Diversification can help smooth volatility without significantly hurting return.

How to handle the unpredictability of the markets: Diversify and invest for your time horizon.

The last thing we want to do as investment managers is invest money for clients for a short timeframe and then have that client request money for a short-term spending need. Some very generic rules of thumb: Less than two-year time horizon: accept little to no interest for little to no risk. Two to five-year time horizon: likely long enough to conservatively invest and outpace inflation. Five to ten years or more: invest in a diversified portfolio that becomes more conservative as the predicted spend date nears.

Here’s hoping for continued basketball excitement, some Spring-like weather, and a smoother ride in the markets!



Leave a Reply

Your email address will not be published. Required fields are marked *