A Reflection: Don’t Focus on the Rocks

When I was a teenager, I got into mountain biking with my friends. It was fun and scary all at the same time. (Just what a teenage boy needs, right?)

There was just one problem: I wasn’t very good at it.

All my friends seemed to float effortlessly down the trail, but not me. I was pretty athletic, so I tried to keep up out of sheer strength, but they would leave me in the dust feeling defeated and exhausted.

You see, my issue was the rocks.

These were not smooth trails. These were rough, rocky, rutted-up trails.

I remember after one particularly grueling afternoon, I had had enough. I was going to do something about this. I went down to the local bike shop and got a “how-to” on mountain biking (I love reading the manuals!). It was a very small book with a retro 1980’s neon yellow cover.

To my amazement, right there on the first page, was a startling tip. It said, “Don’t focus on the rocks.”

I almost protested out loud. What are you talking about? Don’t focus on the rocks? I have to focus on them if I’m going to avoid them.

The author went on to share that, rather than focusing on the rocks, you should “keep looking down the trail”—focusing 20 to 30 feet ahead of you at all times. By doing this, your mind will see the rocks as they pass through your field of view and you will instinctively avoid the larger ones and glide over the smaller ones.

I had serious doubts that this was going to work, but I was desperate. So the next day when I showed up to ride, I decided to give it a try. Instead of looking straight down in front of me like I had grown accustomed to doing, I looked a little farther ahead. And you know what? It was like the rocks magically vanished! I mean, I could still feel myself riding over them, but no longer were they these big, difficult, challenging obstacles. I was relaxed and could let the bike’s suspension do the work. The ride just felt smoother, like I was able to ride twice as fast with half the effort.

“Keep looking down the trail.” These words were a revelation that forever changed my mountain biking experience.

Now, why on earth am I sharing this today?

Because as investors, we know the trail has rocks.

Some of the “rocks” underfoot right now (at the time of posting this) include:

• Rising borrowing costs for businesses and households, with the 10-year Treasury yield at its highest level since 2007 [1] [2]
• Another possible Fed rate hike before year-end [3]
• Energy costs and supply bottlenecks keeping inflation sticky, and record profit margins that may be hard to sustain [1] [4]
• Volatile energy markets tied to the conflict in the Middle East [1]

We also see:

• Strong earnings, with S&P 500 profits up 26% over the past year and Goldman Sachs expecting about 11% growth in each of the next two years, with AI investment driving nearly half of this year’s growth [5]
• Valuations in line with their 10-year average [5]
• History showing stocks have typically gained in the year after the Fed starts raising rates [2], and early signs of energy relief as tanker traffic through the Strait of Hormuz hit a six-month high [1]

All of this to say, there are several ways we as investors can approach the ride:

One:
We can pretend the rocks aren’t there (which works right up until the front tire catches a particularly large one).

Two:
We can stare straight down and catalog every single rock (which is more or less what financial media exists to help us do). Or…

Three:
We can focus ahead of us, confident in our plan, our preparation, and ultimately our Creator to keep us tracking forward, regardless of the rocks under our tires.

The option I think is best?

“Keep looking down the trail!”

Now, I don’t want to oversell the advice I got from that little book. Looking past the rocks didn’t magically make me weightless or riding effortless. To the contrary, I felt every single one of them that day—and I still do.

What changed was that they stopped deciding where I ended up.

So keep your eyes up. We’re watching the trail with you.

—Zak