Days Are Long, Years Are Short

Early in my journey as a parent, someone shared a phrase that has always stuck with me: “The days are long, but the years are short.” In those initial chapters of growing your family, this feels so viscerally true as you’re in the midst of exhausting days compounded by sleepless nights. It’s easy to get caught up in the swirl of activities and information and the feeling that you always need to be doing something. But, at some point, you look up and realize that your kids are grown, you are older, and life has slipped into the future seemingly in an instant. The years can feel short when we look backward and reflect. 

This adage is a reminder that most of the daily headlines we encounter, which may seem important in the moment, all blur together when we zoom out. The noise gets condensed into the shortness of years past. This perspective aligns with our investment approach, which is grounded in long-term historical patterns and macro trends that evolve over decades, rather than trying to time the temperamental ebbs and flows of the stock market over the short-term.

The stock market saw a significant shift during the month of July: the tech stocks that powered market gains in the first half of the year tumbled lower while small-cap stocks, which had been struggling, surged higher. 

This rotation kicked off in mid-July when economic data showed a surprise decline in consumer prices in June, furthering the conviction on Wall Street that the Fed will begin cutting interest rates in September. Investors piled into small-caps, which are more likely to carry floating-rate debt than their mega-cap counterparts, and therefore stand to benefit more from lower rates. In the five days following that inflation report, the Russell 2000 (an index of small-cap stocks) rose by +11.5%, its biggest rally since 2020. At the same time, investors sold shares in large tech companies that reached astronomical prices after leading the market for the past year and a half. Other rate-sensitive sectors like real estate, homebuilders, and regional banks all saw share prices jump higher as well after a sluggish first half of the year. 

For diversified investors, the month was fairly smooth, and portfolio values grew. By design, our investment models have exposure to both large-cap and small-cap stocks, so they capture growth even when sentiment leads to a rotation within the market. We expect these rotations to continue, as they have throughout history, and the optimal strategy is to rebalance, remain diversified, and not get caught up in the frenzy of the current moment. 

While many investors have experienced an accelerated sense of time in recent months, the US Federal Reserve has maintained a decidedly slow and deliberate pace. The Fed paused its rate hike cycle more than a year ago, last raising rates in July 2023. In the ensuing months, economic data has shown inflation declining significantly. Investors and commentators began expecting the Fed to lower interest rates back to more accommodative levels, with expectations getting so far ahead of themselves that, at one point, the market was expecting as many as six interest rate cuts in 2024. So far this year, the Fed has delivered zero.  

While the Fed is expected to announce the first rate cut next month at its September meeting, its strategy of being patient and even slow with its decision process has been a noticeable difference from a world that always seems to be moving faster. 

There are two main reasons why the Fed has not capitulated to the market’s expectations and has held to a slower pace. First and foremost, they are relying on economic data to affirm that inflation has been quelled, and they understand that economic policy (like the +5.25% of interest rate hikes in 2022-2023) takes time to work its way through the economy. The Fed is waiting not only to see data that indicates inflation is lower, but that the data trend holds steady for multiple months and is not an anomaly. This can create a frustrating timeline, but it reflects the Fed’s academic and disciplined approach. The second reason is related to investor psychology and maintaining credibility. The Fed wants to avoid eroding its own credibility by lowering rates too early, only to have to raise rates a few months later when the data shows that inflation crept back up. Instead, the Fed takes the long view and has continuously repeated that it expects to lower interest rates, but that process and timeline will depend on the data. 

The paradox of perceived time, where it can seem to pass slowly in certain instances while going quickly over the years, is a fascinating aspect of our human experience. While time itself remains constant, factors such as attention, memory, novelty, and emotional states all contribute to our subjective experience of time. When life seems to speed up all around us, that is when it’s most important to take a step back and reground ourselves in the long-term plan. 

Whether in planning, investing, or parenting, the best outcomes typically arise when you remain focused on the bigger picture rather than the swirl of daily headlines. In our ongoing work with clients, our goal is to help them grow their capital, outpace inflation, and leverage financial planning to craft a life that is both meaningful and financially secure. With this approach, they are better positioned to weather short-term volatility and make thoughtful decisions that support their long-term goals.