A Gentle Leader for Cerberus
Dogs have been a part of my life. I am a dog lover. My family had several dogs when I was a kid, Setters and Pointers mostly. We have had a series of Labradors more recently, and our current dog is a Rottweiler/Labrador mix. Her name is Libby.
All of our dogs required training. One trainer we worked with suggested we use a “gentle leader,” a fabric harness clasped around the dog’s head that allows for easier control. We have used a gentle leader on our last four dogs and it is a tool we recommend to friends with larger and strong dogs, like Libby. The device is not mean nor restrictive, it simply allows the user to more easily stop the dog from pulling and yanking. We find that using the gentle leader changes the responsiveness of our dog to commands.
Cerberus was a ferocious three-headed dog of Greek mythology. Cerberus guarded the Gates of Hell, containing residents in Hell. According to myth, Orpheus was the only living person to get by Cerberus and into Hell, using music to charm Cerberus into a deep sleep. Don’t ask me why Orpheus wanted to go there.
Lately, the markets have been facing their own Cerberus. Today’s three-headed monster is made up of (1) Covid (2) Inflation and (3) War in Ukraine. Yes, this scary monster is real and threatening. Does our modern day Cerberus have us captured in Hell eternally? Will we be able to use a gentle leader to control this dog and escape from today’s market Hell?
All dogs need training. For the Covid head of Cerberus, we have developed vaccines, better treatments, and behaviors to reduce transmission of the virus. Covid cases and hospitalizations are declining. These are facts, not opinions. For most people, this threat is diminishing.
For the inflation head of Cerberus, the gentle leader we need is more complex. But the answer starts with the Federal Reserve and monetary policy. Too much money in the system leads to inflation. Tighter money supply is needed. Period. Yes, a bitter pill is never easy to swallow but may be the medicine we need. Other steps may be required in addition to this one. Inflation is thrashing his teeth and investors need to be careful to avoid the bite.
The war in Ukraine is beyond prediction, the craziest head of our scary Cerberus. Geopolitics and power, short and longer term global impacts, modern warfare and modern media are all influencing this ugly situation. I think it is fair to say that the war creates a very large emotional impact on society, and is certainly influencing market behavior. My gut says that we will find a way to resolve this conflict, and reasonable diplomacy usually works. But my worry is that we could escalate. I am not sure we can find a gentle leader to control a despot.
As I have said before, at times like these both investors and advisors need to be diligent and focus on goals. Pulling out of the market and yanking investments is disruptive to long term financial planning. Remember, training takes time. Lessons need to be repeated. Punishments and rewards are part of the training. There will be good training days and bad ones just as sure as there will be up days AND down days in the markets. We recommend a gentle leader for training purposes.
Ralph McDevitt March 14, 2022
Any opinions are those of Ralph McDevitt and not necessarily those of Raymond James.
This market commentary is provided for information purposes only and is not a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation to buy, sell or hold a specific security. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Diversification and asset allocation do not ensure a profit or protect against a loss.
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