It seems that originality in filmmaking is increasingly rare today. Instead, reboots and sequels dominate the landscape. Take 2025, for instance: we’re seeing the return of Fantastic Four, Superman, and even Jurassic Park, a franchise born over 30 years ago. Michael Crichton, who first brought Jurassic Park to life, also authored Westworld in the 1970s, a lesser-known work that was recently revived as an HBO series. Without spoiling the plot for those who haven’t yet watched it, the series raises an intriguing question: Can human behavior be so predictable that it can be pre-programmed?
We all like to think of ourselves as unique—our quirks, our individual personalities—but when it comes to decision-making, do we really act in any way that differs from others? This question becomes especially relevant when we look at the financial world. The media is constantly filled with economists and strategists forecasting the future, especially in times of uncertainty—whether it’s tariffs, taxes, or geopolitical unrest. Yet, despite their expertise and their access to a wealth of data, both everyday investors and seasoned professionals alike often fail to beat the market.
According to the 2024 Dalbar QAIBR study, the average equity investor has underperformed the S&P 500 by more than 1% annually over the past 20 years. While 1% might seem like a small margin, consider this: A $100,000 investment would have grown to $585,644 for the average equity investor, but to $716,880 in the S&P 500. It’s easy to assume that individual investors lag because they lack the time, tools, and expertise that professionals possess. But even professional investors often fail to deliver superior returns. In fact, the 2024 Morningstar Active/Passive Barometer report reveals that approximately 92% of professional U.S. Large Cap equity investors have underperformed the S&P 500. So, why is this happening?
Most investors, whether amateurs or professionals, assume rationality in their decision-making. If prices rise, we buy less; if they fall, we buy more. Yet, markets don’t follow this straightforward logic. They are influenced by imperfect, often conflicting, information. For instance, how will tariffs, taxes, inflation, and geopolitical tensions impact markets? In recent months, the markets have largely ignored negative news and instead focused on the potential for positive outcomes, driving equities to new all-time highs. The markets could just as easily have responded to fears of higher inflation, rising interest rates, or a slowing economy, pushing stock prices lower. Essentially, the collective behavior of investors, guided by sentiment rather than cold, hard facts, often pushes the market in one direction, regardless of the underlying risks. This herd mentality is why; despite knowing the risks, investors often fail to navigate market volatility effectively.
Our investment team understands the irrationality that drives markets. That’s why we’ve built our investment process to not only survive but to thrive amid market fluctuations. We’ve been able to “look through” short-term noise and stay focused on material facts. Before recent market volatility, we maintained a neutral stance on equities, and we continue to do so. While we remain cautious about the historically high valuations and potential risks of a market correction, we also stay vigilant, waiting for the speculative fever pushing stocks higher to subside.
This brings to mind a timeless quote from Charles Mackay in his classic Extraordinary Popular Delusions and the Madness of Crowds: “Men, it has been well said, think in herds; it will be seen they go mad in herds, while only recover their senses slowly, and one by one.”
