“Trust the process.” Those were the words uttered by newly minted Philadelphia 76ers General Manager Sam Hinkie, a career statistics analyst, in May 2013. The fledgling NBA franchise had just entered into a complete overhaul, and Hinkie made it clear that the team’s roster would be rebuilt from the ground up. He would rely almost entirely on analytics and algorithms to guide their path, ushering in a new era in team management; something that both excited and terrified nearly everyone else involved. Hinkie warned that it would take time, that there would be hardship, and that this undertaking was not for the faint of heart — but ensured everyone involved that the product would be worth the patience. He implored the Philadelphia fan base and ownership to “trust the process.”
What came in abundance over the next few years certainly tested that trust: losses — lots and lots of losses. In fact, the 76ers lost so many games, they set an NBA record for the longest losing streak in NBA history. Still, Hinkie reminded everyone involved to “trust the process,” and that the end result would be worth it.
Unfortunately, just over 30 months into his tenure, the embattled franchise owners decided they couldn’t take the “torture” anymore, and made the only choice they felt they had — they pulled the plug. The keys to the front office were handed to someone new, and Hinkie was ultimately forced out a few weeks later.
It wasn’t until this winter of the current NBA season did fans begin to see a glimpse of the cohesion and chemistry that Hinkie had alluded to almost four years ago, finally coming to fruition for the 76ers. That’s right, the pieces he put in place are beginning to pan out and show results. But because the owners couldn’t handle when times inevitably got tough, the team’s full potential will almost certainly not be realized. In fact, we may never know what could have been if those in power in Philadelphia had simply been able to “trust the process.”
Investors’ experiences in the market have the potential to play out in eerily similar fashion. Throwback to a mere 13 months ago, 2016 was tabbed by many to be the market’s breakout year. Many “experts” entered the year with hopes that the relatively flat returns of 2014 and 2015 were going to be pushed aside, and the market would reach new heights. Then came what no one saw coming: the worst January on record, then Brexit, then the realistic prospect of a Trump Presidency; each of them leaving bits of December’s projections broken in their wake.
As the year wore on, 2016 continued to give us plenty of reasons to question our trust in the process, as the media propped up each headline’s potential to send the market into a freefall. Many investors were ultimately left asking “What unforeseen geopolitical event will cause the market to move violently this week?”
But even with all those reasons for investors to question their direction, question the advice they were getting from trusted sources, and even question if they should be searching for an exit point, the end result was what most had been hoping for: positive returns. Those that weathered the storm were ultimately rewarded. It was a prime reminder of just how utterly unpredictable the market can be in the short term. So unpredictable for example, that every single Goldman Sachs analyst incorrectly predicted both the election result and the resulting market move if Trump were to win. So much for forecasting, huh?
Ultimately, whether you are a professional basketball fan or not, there is a lot to learn from both Sam Hinkie’s disciplined methodology, as well as his former employer’s inability to see the big picture. Various research consistently shows that the #1 indicator of investment performance is investor behavior. No doubt, 2016 was a wild ride, and some years may be rougher (or conversely, more pleasant) than others. However, by working with a trusted financial advisor that has a consistent, diversified methodology, and coupling that with the personal fortitude to “trust the process,” gaining the necessary (albeit uncommon) ability to look past the noise that comes with short term market moves is certainly possible.
With 2017 in full swing, you can be sure your McKinley Carter team of financial professionals is well-prepared and well-equipped to help you navigate the forces that impact your total financial picture, no matter what the year may bring.