Market Update & Murphy's Law

Jonathan Adomait |

Prior to the US election, we received a number of questions about what any election outcome might do to investor's portfolios. Our answer was simple. We didn't think it would have a significant impact on portfolios, regardless of who was elected. 

Heading into the election there was uncertainty as who might win the election, and markets hate uncertainty. Volatility rose, and a major US Stock Market index (S&P500) slid 7.48% from Oct. 12 to Oct. 30th. That point marked the low, and the S&P500 started to rally from Oct. 30th onward, up 10.67% as of Nov. 16th, and surpassing its previous level from Oct. 12th. (See Chart below)

Source: Koyfin

There was some speculation  that the market might dip after the election results... and for those that tried to speculate the market might drop -  it turned out to be a bad move. According to a recent UBS survey, over 35% of wealthy Americans (those with investable assets over $1M) tweaked their portfolios to raise cash ahead of the election. (Read more on this here.

When we design portfolios for our clients, the portfolios are prepared for situations like these. By having a combination of different managers, strategies and uncorrelated assets, portfolios can move through periods of volatility with much less movement.

Murphy's Law & Takeaways

Ed and I occasionally read a blog called Sovereign Man for his insights on timely and current matters. His recent take on Murphy's law can read below.

In early 1948, a group of US Air Force officers was working on a secret research project in the California desert codenamed MX981.

The purpose of MX981 was to test how extreme gravitational forces from fast-moving fighter jets would impact the human body.

Aviation was still pretty new; in fact, the US Air Force had only been created about six months prior, and the Defense Department wanted to find out just how much physical punishment a fighter pilot would be able to handle.

Most people have never been in a fighter jet. But I can promise you from personal experience, the gravitational force can feel absolutely crushing to the body, even causing a pilot to pass out.

At the time, it was widely believed that the maximum limit on the human body was “18 G’s”, i.e. 18 times the force of gravity. And MX981 was tasked with finding out for sure.

So the researchers built a rail-mounted, rocket-propelled sled; the idea was to get the sled moving up to 200 miles per hour, then slam the brakes so hard that the sled would come to a halt in less than a second in order to simulate extreme flight (and crash) conditions.

They nicknamed their little contraption the “Gee Whiz”. And in early 1948 they started human trials.

The guinea pig was one of the researchers-- a maverick scientist named John Paul Stapp. Stapp was able to subject himself to an astounding 35Gs, far past the theoretical limit.

And at that point another researcher, Captain Ed Murphy, was sent out to take an independent reading of the experiment.

It turns out that Murphy’s crew installed their sensors incorrectly, leading to erroneous readings… not to mention all the other mechanical failures that kept taking place.

The research team was breaking new ground; nothing they were doing had been tried before. The equipment they designed was custom-built, and things broke all the time.

Murphy was reportedly irritated about the constant failures, and at some point complained that ‘if there’s any way they can do it wrong, they will.’

Years later this observation morphed into what’s known as Murphy’s Law, often stated as “whatever can go wrong, will go wrong.”

In that context, Murphy’s Law may be the perfect summary of 2020. Riots and social unrest, political folly, Covid, brutal lockdowns, spiraling debts and deficits, etc. And it’s all happened so quickly. Murphy’s Law.

But as the story goes, there’s actually another interpretation of Murphy’s Law.

In 1948, after finally figuring out the proper results of their experiment, the MX981 research team held a press conference, and a reporter asked, “How is it that no one was severely injured during your tests?”.

John Stapp, the maverick who strapped himself into Gee Whiz, replied, “We do all of our work in consideration of Murphy’s Law. . .”

In Stapp's view, Murphy's law was an optimistic outlook. It was a viewpoint grounded in optimism and rationality. It was a way of identifying all the possible things that could go wrong, and PLANNING around them. Today, Murphy's law is often viewed a pessimistic stance - everything that can fail, will fail. It's interesting how society has taken this old adage out of context.

Murphy's law is the very essence of proper planning. Proper planning requires foresight and flexibility, and the ability to adapt when your circumstances change. This is so analogous when it comes to your own personal finances. If you don't have a plan designed specifically for you, how are you going to be prepared for unforeseen events? 

Everyone needs a plan... the hardest part is the will to actually sit down and do it. That's where we can help. If you've been thinking about putting together a plan for you or someone you know, reach out to us... we'd love to help walk you through what your future looks like.


Jonathan Adomait
Financial Advisor, BASc

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