The Stock Market Feels Strange Right Now
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I'll be honest, I don't quite know what to make of this market.
On one hand, things seem great. The S&P 500 is up 10% year-to-date. AI innovation is everywhere. And we'll soon be greeting some of the most anticipated IPOs in stock market history with the likes of SpaceX, OpenAI, and Anthropic. There’s a lot of excitement right now.
On the other hand, the market also feels like a house of cards, with numerous catalysts ready to huff and puff and blow it all down.
Things in the Middle East seem to flip-flop every day. Inflation is on the rise...again. And AI, while revolutionary, is also causing many people to question how safe their jobs are.
Paired with the fact that consumer sentiment right now is at a record low, things feel shaky...to say the least. And I don't know where we’ll go from here.
Based on some of the replies I’ve received to these emails recently, I know that some of you have completely liquidated your portfolios and moved 100% into cash in anticipation of tough times ahead.
Meanwhile, I know plenty of investors out there are still piling into some of the stocks that have recently seen the most substantial runups (ones like Micron, Intel, Rocket Lab, Nebius, and others), feeling confident that there's still some juice left to squeeze.
It's always interesting to see how investors across the board react differently to the same stock market. That's one of the reasons I really enjoy this hobby — investing is as much a study of human behavior as it is a study of businesses.
Throughout history, the truth is that there has always been something to worry about. Whether it’s wars, inflation, geopolitical issues, technological disruption…you name it.
The specifics change, of course, but the uncertainty itself is nothing new. For the investors that came before us, trying to build wealth through the tumultuous periods of the past probably felt just as uncertain as today’s increasingly hot and shaky market feels right now.
Personally speaking, I'm both excited about the future over the long-term and concerned by what might happen in the near term. But I've also come to accept that I have absolutely no idea what’s going to happen next, and neither does anyone else.
Because of that, I try not to let myself get too wrapped up in the drama either way. In fact, one of the great benefits of being a dividend investor is that you can detach yourself from all of that a bit.
It's easy to forget this when you spend so much time looking at ticker symbols on a screen, but the dividend-paying, cash-flowing businesses you own are a lot more resilient than you think. And for many of them, this isn’t their first rodeo.
Whenever a downturn does come along (and eventually one will), what makes it survivable for a dividend investor is the fact that your income does not depend on what the market does on any given day.
Your dividends will keep coming in whether the S&P 500 is up or down. That income is a result of a company's operational performance, not its share price performance in the market (which, remember, is controlled by the manic Mr. Market).
If you believe that you own great businesses, and you have reason to believe those businesses will continue creating value over the next 10, 20, and 30 years, then the plan does not change.
Once again, I don't quite know what to make of this market. But it also doesn't concern me.
My concern is on my companies' ability to continue generating profits and their willingness to share those profits with shareholders. And in that, I feel extremely confident.
Having said that, now I want to hear from you: How are you feeling about the market right now? Write to me here and let me know.
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"What are your thoughts on railroad stocks?"
- James | YouTube
As a group, I think railroad stocks make for interesting investments, and some exposure to the industry is definitely worth considering for dividend investors.
The industry itself revolutionized transportation when it was first introduced to the world, and it has remained an essential part of global commerce ever since. In fact, our economy would look very different without railroads. I don't think a lot of people realize just how important they are when it comes to moving goods across the country.
Not to mention, these days, nobody is building a competing railroad network across North America. The tracks are already laid, the routes are already established, and the infrastructure is already in place. That creates a massive barrier to entry and gives the existing companies in the space a pretty big competitive advantage.
Plus, a lot of these companies have been fantastic dividend payers. Union Pacific (UNP), for example, has paid a dividend for almost 130 straight years.
The downside to the railroad industry, I guess, is that railroads are still somewhat cyclical businesses. If economic activity slows down and fewer goods are being shipped around the country, railroad companies will feel the impact.
Still, over the last century, these companies have navigated through recessions, wars, inflation, and countless other challenges while continuing to play a pivotal role in the global economy. This is not their first rodeo.
Overall, if you're looking for businesses that are both essential and difficult to disrupt, I think the railroad industry is definitely worth a closer look.
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