Five Things Investors Got Wrong This Year, And How To Fix Your Strategy

What to do now that inflation, interest rates, and volatility are up while many stocks are down.

- Ryan Derousseau

AS INVESTORS, WE ALL GET THINGS wrong from time to time. Just ask Irving Fisher, the once famous (now infamous) economist who declared in 1929 that equities would keep racing ahead, since the stock market had reached what he called “a permanently high plateau.” Eight days later the market plunged, setting off a series of declines, culminating in Black Tuesday— and, of course, the Great Depression.

While Fisher’s market call is now part of Wall Street lore, he’s hardly alone in making bad assumptions about stocks. At the end of last year, for example, most investors assumed that the tax cuts passed in Washington would fuel another round of risk taking on Wall Street, pushing the bull market ever higher.

Clearly, that hasn’t happened yet. Meanwhile, several things that investors assumed wouldn’t take place—like the return of worrisome levels of inflation or volatility—are starting to materialize.

This isn’t necessarily a big deal, so long as you adapt your thinking and strategy to reflect the new market reality. Investing success doesn’t require prescience; it takes a willingness to acknowledge miscalculations and to make tactical adjustments accordingly.

1. Volatility Roars Back

The assumption

FEAR ISN’T WHAT USUALLY kills a bull market; it’s often the lack of fear, or that sense of comfort and confidence that leads investors to forget how risky investing can be.