The Compound and Friends: Things That Never Change With Morgan Housel

When it comes to investing, some things are always changing. For instance, 2023 has seen the market move all-in on the artificial intelligence (AI) trend. That’s helped stocks move out of their 2022 bear market lows.

However, in some ways, that isn’t a change. There’s often some interesting trend attracting the markets. And while that trend changes over time, interest can lead to overinvestment. That creates the risk of a bubble.

Ultimately, understanding change can be easier when looking through the lens of what doesn’t change. That can help understand the stock market’s cycles of fear and greed.

Looking at unchanging ideas like that can help investors better anticipate big moves. For instance, the market’s pre-election year seasonal trend has played out strongly this year.

Markets may have sold off in the fall over fears of rising interest rates. But a look at history shows that such a selloff should have been expected on average.

Applying that same concept of seasonality, we should see more market volatility in 2024.

The last election year cycle had the Covid outbreak. And other election year cycles like 2008 had the housing market crash. And 2000 had the tech bubble bursting.

That doesn’t guarantee a big market crash next year. But it does suggest that investors should take a cautious eye, as election-year drama in markets isn’t likely to change.

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