It’s a given in any market that there’s never 100% clarity about everything. There are always situations where there are reasonable people willing to take both sides of a trade. Today’s world, though, seems unusually murky.

There’s the very ugly, although highly predictable, implosion of the UK ecpnpmy post-Brexit. There’s Putin’s invasion of Ukraine. There’s trouble in the Middle East. There’s the expanding trade war with China. There’s climate change. There’s dysfunction in Congress threatening a potentially hugely damaging US debt default. There’s the continuing rise in interest rates from pandemic-era lows–toughing 5% on the 10-year this morning (a level that would have been considered normal pre-2007, and which would imply a 20x multiple on S&P 500 earnings to be roughly neutral). In the US, there’s been a rash of book bans in school libraries (including one cited in Alabama because of the state’s objection to the author’s surname, Gay), prohibitions against teaching African-American studies and condemnation of drag artists.

And, of course, there’s former president Trump, who attempted to overthrow the government in order to keep himself in office after he lost the 2020 election. He is currently under indictment on 80+ felony counts in four criminal cases, but nevertheless is by far the leading candidate to run in the next presidential election under the banner of the party of Lincoln, Eisenhower and Reagan.

As an American, I’m particularly disturbed by the dystopian turn in the Republican party. The 80% ytd rise in the bitcoin price says I’m not alone (gold is only up by about 8%, which I read as showing its lack of contemporary relevance as a store of value in the developed world rather than a vote of confidence in the state of public policy).

What is an equity investor to do?

Two thoughts:

–for virtually all professional stock market investors, success is measured by achieving performance over and above the return on a benchmark index. The typical benchmark would be either the S&P 500 or one of the Russell “style” indices (meaning containing a tilt toward growth or value, or small cap). The most sensible approach during a time of deep uncertainty, in my view, as well as the standard way of playing defense, is to have a portfolio that looks/acts a lot like the index. For you and me, I think most of our money should look a lot like this most of the time

–the key to success as an active investor is definitely not to know a little bit about just about any topic. It’s way more important to know more than most people about one or two things (or if you’re lucky, three or four), which end up being the keys to portfolio construction. In more concrete terms, for me a reasonable strategy would be to have 90% of one’s equity money in an index fund and the rest in two or three names that you’d spend all of your stock market time researching. The more complex and confusing the environment–like today’s, the more tempting it is to lose focus. But the two essential question to ask, now and really any time, are: whether/how new developments affect the profit prospects for the active bets I’m making, and whether the ups and downs of the market are presenting an opportunity to upgrade my active holdings.