Nationally known investment adviser Paul Dietrich visits Lexington on Thursday to spread his philosophy of actively moving investments instead of keying to such market indices as the Dow.
Dietrich, who is chairman and CEO of Foxhall Capital Management, said the key is focusing on "long-term persistent trends in the U.S. and global economic markets."
Dietrich noted that the United States has had a bull, or increasing, market every five to eight years on average since 1945. Those periods are followed by bear markets that last 18 months to two years on average. "Understanding the long-term economic and stock market cycles is the secret to successful investing," he said.
And while stocks fluctuate plenty in bull markets, studies have "concluded that over the long term, meaning at least 12 months, the stock market always reflects the underlying economy," he said.
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"The key to a successful investment strategy," he said, "is to know when the economy is expanding and doing well or is contracting and going into a recession."
He said Foxhall Capital doesn't attempt to predict markets but responds to them in an active way. "When our research identifies weakening markets and a shift from expanding markets to recession, the Foxhall Capital system shifts into 'defensive mode.'"
Defensive moves include investing in high-quality bonds or U.S. Treasury notes, "the ultimate in safety."
Dietrich compared his approach to passive investing, which is frequently referred to as "buy and hold."
"Generally, a passive investment strategy seeks to manage risk by allocating investments among a broad array of asset classes and holding those assets for an extended period of time regardless of market conditions," said Dietrich, who is also the principal mutual fund manager of the Shepherd Large Cap Growth Fund.
The results, he said, can be less than stellar, noting that the stock market has fallen so much that for American investors "it has been a lost decade."
"Without active money management, after two booms and two busts, stock markets have earned them nothing, or less than nothing, in the past 10 years," he said.