Growing up, I played some hockey. Most kids in our neighborhood played pond hockey (probably the best kind of hockey), with those wearing galoshes relegated to playing goalie. Some of us went on the play house league and eventually high school hockey. My brothers were all very good, and I was… well, I made the team and saw a few game minutes, but most of my ice time was during practice.
Hockey is a beautiful game played with a unique social exception: fist fights. At times they are a singular duel, fueled by long simmering resentments. Other times, when animal spirits run high, offenses will result in bench clearing brawls.
So far this year, what we have witnessed in financial markets is a hockey fight.
What the uneducated hockey fan may miss is that during hockey fights, most of the participants aren’t actually fighting. That was always my plan when playing for Dowling. Just grab an opposing player you knew to be reasonable, say as quietly as possible “we’re not actually fighting” and wait out the storm!
I had a regular scheduled non-fight date with Jamie Blasberg, captain of the Urbandale High School team. We grew up together, attended Rolling Green Elementary and played countless pond hockey games. So when/if the team hotheads started fighting, we would grab each other, wrestle around a bit, and attempt to not laugh too loudly. A proper exhibit of school spirit without any actual risk of bloodshed.
This year, market hot heads came into the game upset about recent injustices to their world view, inflation, and employment numbers, and then were further upset by the war in Ukraine. They’ve thrown down their gloves and made a mess of… mostly their own finances.
At the end of a hockey fight, most players adjust their jerseys, pat the “opposition” on the head and resume the game. Some will need some reflection time in the penalty box. Some will have truly suffered for their emotional excess; they are in the corners, cut and bruised, jerseys torn, faces bloodied, exiting the game.
The most reckless of investors were bloodied in the first half of 2022: the speculators, the leveraged players, those who succumbed to the animal spirits of financial markets. It would have been better if they had come into the game planning not to fight, or better yet, never came to play at all.
This year, financial instruments are roughly down in order of the risk assumed by the investor. For the conservative investor, modest declines have been experienced, but only half of this game is over and the season still awaits. It’s time to adjust your jersey and go play the rest of the game. It’s just one game and God willing, the season will be long.