investing is not putting down chips on a gambling table

Don’t bet on the recent rally

22 August 2022.

Investing is NOT gambling; done right, it involves thoughtful portfolio construction – incorporating objectives with capital market assumptions influenced by the current environment and expectations going forward. But sometimes gambling is afoot in the markets.

For example, Bed Bath & Beyond does not have a new must-have bathroom accessory product that would justify the share price jumping from $5 to $25 over the past week, with the subsequent drop back down to $11. Yes, the Reddit/options traders are at it again, but the biggest gamble may be the recent rally in the markets.

A few days ago, the S&P 500 reached a level in which it was down less than 10% compared to its all-time high. It’s been a little weaker since then, but still an incredible rally from the lows of mid-June. The S&P has risen +17%, Nasdaq +22% and TSX +11%.