We’re worried – nervous, to say the least. U.S. equities, which account for roughly 67% of the global equity market and represent our largest exposure, appear priced for perfection. This isn’t an atypical feeling for us. We have spent the better part of our careers in this state – constantly worrying about what could go wrong. Our firm’s ethos has always been to worry about the downside; the upside will take care of itself.
To start the new year, we wanted to take inventory of the data, some of which is anecdotal, and ask whether our fears are justified. Are we falling back on heuristics, or are we examining opportunities in a deliberate and intellectually honest way? The answers, as always, are nuanced.