What the Stock Market Taught Us This Year: Don’t Fall for These Investing Traps

livemint.com:

The uncertainty around near-term interest rates has dominated the story of the stock market in 2023. Perhaps not since the 1970s—when runaway inflation and sky-high interest rates were the crisis du jour—has monetary policy affected investment outcomes in such a pronounced way. Yet look more closely, and it would seem that Wall Street has been more influenced by perception than reality: Company and individual balance sheets remain mostly healthy, businesses are battle tested and unemployment remains low.

Similarly, the malaise surrounding the economic environment belies what we are seeing. Cruise ships are sold out, restaurants are packed, holiday shopping was off to a strong start and 82% of S&P 500 companies reported a positive earnings surprise in the third quarter. Still, a nervous atmosphere has undercut stock performance.

Scores of share prices have been lackluster as company fundamentals have been eclipsed by macroeconomic conjecture. We have lost the trees in the forest. But as someone once declared, “It is a market of stocks, not a stock market." This is a wise reminder that no matter the conditions, there are investment opportunities to be had.

In fact, the more economic obfuscation, the more sectors are hammered, the more stocks are orphaned, the better the odds of long-term investment success. After a year of hand-wringing through monetary policy guesswork and market fluctuations, many wonder how best to maneuver in the new year. Here’s our advice: Avoiding some of the biggest market traps can be a winning strategy.

Don’t Fed-watch “Don’t fight the Fed" is a well-known market mantra. The idea is to buy stocks when the Fed is lowering interest rates and sell when the Fed is raising them. This psychology has