Complacency is not a strategy
There is comfort in hitting a good stride. It is cozy when all is great at work, at home, the economy around you. It feels satisfying when we have the little gears of life running in order. It may be a combination of being creatures of habit and liking to have things going as planned. It may be the feeling of satisfaction from reaching a point of success along the journey. It may also result in kicking back in reflection which just might lead to the edge of complacency.
We can get too comfortable with how things are going. Even those amazing slippers you purchased years ago which now fit your feet perfectly are still one day going to wear out. You might notice how dingy they are getting or the threads starting to come undone, but with being so comfortable, we get complacent acknowledging we are going to need a new pair soon. We become reluctant to change because we love the comfort and dread breaking a new pair in.
Investments are not a pair of comfortable slippers. But think of how often we get comfortable with the markets when they are going to all time highs. We may get so comfortable, our complacency sets in when it comes to considering any changes to strategy. There have been several times where the investment markets have become complacent as a whole and continued to move upward. In some of these situations, changes have started to happen, and the urgency to adapt was overshadowed by the comfort in how great things have been. There are some tools to evaluate the potential level of concern in the marketplace. The Volatility Index (VIX) would be a good reference. As this number gets lower while a market is moving higher, it might (may, possibly, could) be a sign of complacency in the investment markets.
Complacency is not a strategy as it does not prepare you for changes. When investment professionals discuss changing strategies in times of complacency, it can be met with “things are great, why do you want to move things around?” We understand the feeling. However, our job is to not support complacency but to maintain appropriate strategies for your objectives. We encourage strategies based upon pro-active ideas versus reactive adjustments