Those of you with children and grandchildren are probably familiar with the Build-A-Bear Workshop (BBW) at a mall near you. Since 1997, the St. Louis retailer has delighted boys and girls alike with an interactive and memorable stuffed animal making experience. Build-A-Bear is the epitome of an American success story: a ten year old girl shopping for stuffed animals and unable to find what she wants decides she’ll make her own… and the rest is history. What started with one store in the St. Louis Galleria now stands 400 strong. Initially, Build-A-Bear offered basic bears for kids to design and create, but today the Workshop offers everything from Cinderella to Captain America. Trust me, if a child can dream it, at Build-A-Bear they can create it. I’ve even awoken to a few of Carter and Caroline’s creations (wonder how they got there?).
As I reflect on Build-A-Bear I’m reminded that in today’s world of competitive media and political ambition, the influence financial and political analysts have on stock market behavior is significant. Through the power of the press, media and political pundits truly do affect investor psychology. There is substantial motivation for some purveyors of information to “build a bear stock market narrative” in order to promote selfish agendas. Consider: do folks pay more attention to investment news when the market is climbing or falling; do they react more to political fodder when it’s positive or negative; if everything was reported as roses, would people still listen? There is no doubt a sinking S&P 500 creates more buzz for talking heads and campaign trailblazers than a rising one. However, while some may benefit from building and selling the next bear market storyline to their audience, the reality is the market often doesn’t listen. For example, since 1980 the S&P 500 has declined on average 14% within every calendar year, but has rebounded to post a positive annual return in 77% of those years. Stock and bond markets are resilient systems whose fundamentals typically overcome short-term noise to prevail over the longer term. So, while some might be determined to “build a bear narrative” and profit from the power of pessimism, perhaps we should leave the interactive Build-A-Bear experience to the kids in the Workshop (see a list of my current investment realities below).
Here’s a review of the major index returns from Q1 (with dividends), as the Dow and S&P slowed from 2014’s pace: