Thanksgiving is a very American holiday, and not just because that is where it originated. To me, as an immigrant to this nation, one of the best things about the national psyche here is the propensity to be thankful. The families of almost all Americans have, at some point in their history, been the victims of oppression and persecution that could be religious, political, economic, or race-based, for example.
Whatever the cause though, it seems to make people here thankful for things that others take for granted. There are lots of other rich, free, democratic countries around the world, but the retold experiences of forefathers who longed desperately for liberty and self-determination, and who often took enormous risks to achieve that for their families, produces a special kind of thankfulness that is celebrated on the third Thursday in November.
It may seem somewhat trite after such philosophical musings to look for areas of markets and investing to apply that thankfulness, but for me it is an annual exercise that is not only healthy but can also often give enormous insight.
That is especially true right now, when it seems that every positive has an equal, implacably opposed negative.
The first and most obvious thing for which investors should be thankful is the chart below for the S&P 500 over the last ten years.
Some will no doubt concentrate on the last couple of years and thank Donald Trump, while others will look further back and be eternally grateful for Barack Obama’s calm outlook and steady hand after the recession. Still others will, as I do, look at the chart above and see it as a testament to the strength and resilience of America’s people and its economy, despite, not because of, the influence of any politician.
Regardless of where you think credit lies, however, we have come a long way from the dark days of early 2009, and for that we should all be thankful.
Beyond that, there are two other things which have made that strong, upwardly-slanting chart possible, and for which we should therefore be grateful, although both are often touted as negatives and both have the capacity to make a lot of people angry.
The first of those, and the second reason I am thankful, is the Federal Reserve Bank. I am old enough to remember a time when the Fed was the bête noir of the Left. It was considered an enemy of working- and middle-class people, whose market machinations were expressly intended to protect and enhance the wealth and power of the elite.
Now, of course, it is Donald Trump and others on the Right who are mad at the Fed, seemingly believing it is a part of some vast liberal conspiracy to undermine their policies.
That bipartisan disdain is evidence enough that the Fed is an institution for which we should be thankful, but if you aren’t, as I am, simply predisposed to like anything that makes politicians angry, look again at the chart above and consider the Fed’s actions as the recovery has progressed. Under Bernanke, Yellen and now Powell, the American central bank has adopted innovative, brave policies that have then necessitated a careful, well thought out exit strategy.
So far, even in the face of politicians on both sides of the aisle more intent on opposing anything proposed by the other side than devising constructive fiscal policy, the evidence suggests that they have succeeded.
The third thing for which I am thankful is not quite as frequently disparaged as the Fed but is also something that many people feel is an evil force: high frequency trading (HFT).
Before anybody’s head explodes, I should clarify the difference between high frequency trading and algorithmic trading, two different things that often get lumped together. Algorithmic trading is done by computers programmed to react to certain market conditions or news, whereas true high frequency trading is done by computers that, as the name implies, transact rapidly, usually for fractions of a penny in profit.
The first causes instability in the stock market by exaggerating moves, the second counteracts that by providing a constant stream of liquidity. If you think the effects of algorithmic trading are bad now, imagine them in a much less liquid market and you too will be thankful for HFT.
One of the wonderful things about Thanksgiving is that it encourages a positive outlook in all aspects of life, and that can be applied to the stock market as well. The fact is that as bad as things look during and just after a period of volatility such as we have just endured, it is all a matter of perspective. If looked at with a determination to find the good, it can often be surprising what you find.