Ignore the Dog

November 09, 2022

Bill Bernstein recounts hedge fund manager Ralph Wanger’s brilliant analogy of the markets:

He likens the market to an excitable dog on a very long leash in New York City, darting randomly in every direction. The dog’s owner is walking from Columbus Circle, through Central Park, to the Metropolitan Museum. At any one moment, there is no predicting which way the pooch will lurch. But in the long run, you know he’s heading northeast at an average speed of three miles per hour. What is astonishing is that almost all of the market players, big and small, seem to have their eye on the dog, and not the owner.[i]

Here's the S&P 500 thus far in 2022 (the dog):

[ii]January – mid-March:                   -12%

[iii]Mid-March – end-March:              +11%

[iv]End-March – mid-June:                -21%

[v]Mid-June – mid-August:                +17%

[vi]Mid-August – mid-September:      -10%

Here’s the S&P 500 over longer periods of time (the owner):

[vii]5-year return:                                +65%

[viii]10-year return:                             +186%

[ix]20-year return:                               +364%

Obligatory disclaimer that you cannot invest directly in the S&P 500 index, and an individual investor’s performance would differ from the above data given trading costs, expenses, etc. I use the S&P 500 index here as a proxy for the stock market writ large, as is customary.

Everyone has noticed “the dog” going haywire this year. We often forget “the dog” has been rather excitable throughout the last 20 years. That period includes much of the “Lost Decade” – a 10-year period during which the S&P 500 returned 0%, the worst recession since the Great Depression, the slowest economic recovery coming out of a recession on record, and the most abrupt 30+% drop in stock market history.

The observation Wanger offers at the end of his analogy is worth repeating:

What is astonishing is that almost all of the market players, big and small, seem to have their eye on the dog, and not the owner.


Sean Cawley, CFP®



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Content here is for illustrative and educational purposes only. It is not legal, tax, or individualized financial advice; nor is it a recommendation to buy, sell, or hold any specific security, or engage in any specific trading strategy. Results will vary. Past performance is no indication of future results or success. Market conditions change continuously.

This commentary reflects the personal opinions, viewpoints, and analyses of Resolute Wealth Management. It does not necessarily represent those of RFG Advisory, clients, or employees. This commentary should be regarded as a description of advisory services provided by Resolute Wealth Management or RFG Advisory, or performance returns of any client. The views reflected in the commentary are subject to change at any time without notice.

[i] Bernstein, William J. The Four Pillars of Investing. McGraw-Hill, 2010. Pg. 59.

[ii] YCharts, SPX Level Chart, 12/31/2021 – 03/14/2022

[iii] YCharts, SPX Level Chart, 03/14/2022 – 03/29/2022

[iv] YCharts, SPX Level Chart, 03/29/2022 – 06/16/2022

[v] YCharts, SPX Level Chart, 06/16/2022 – 08/16/2022

[vi] YCharts, SPX Level Chart, 08/16/2022 – 09/19/2022

[vii] YCharts, SPX Level Chart, 09/12/2017 – 09/12/2022

[viii] YCharts, SPX Level Chart, 09/12/2012 – 09/12/2022

[ix] YCharts, SPX Level Chart, 09/12/2002 – 09/12/2022