Market indicators enticing you to make changes to your investments might be the biggest threat to your long-term success.
Much of the “money media sphere” revolves around speculating about “market indicators.” This term is very broad and usually means a measurement that that particular article or conversation is focusing on to support the market predictions being made.
In a globalized economy, however, there are infinite market indicators one can focus on to prove or disprove a particular outlook. The insidious nature of these various “indicators” is to condition investors to believe that, because of some market trend or event, they should immediately react and make a change to their portfolio. This attitude supports an active portfolio management mentality—and if you’re an experienced investor who’s done your research, you already know—active management is a fool’s game. It is the passive, long-term investor who will outperform even the most self-appointed clairvoyant market experts. (I might point out, all these so-called crystal ball readers are still working, which always makes me wonder why they don’t just take their own advice, become rich, and no longer be on T.V.)
Below I discuss two very commonly used market indicators that are often cited as not only a good measure of the current market health but also what future direction the market may take. I use these (and others) to prepare for conversations with clients and colleagues about where the market is and what the guess is for the future. But here is the qualifier—I only rely on indicators as a way to consciously observe what is happening in real time; I do not ever recommend making changes to investment strategies based on these indicators. Instead, they assist in having a knowledgeable discussion about the economy and emotionally prepare clients for a poor period in the market that may or may not happen based on these metrics.
Total Stock Market Index
The stock market is not the economy. However, it does give us an indication of how investors feel about the economy and in particular their view of corporate America. It is as simple as: when the index is up people are optimistic; when the index is down people are worried. Generally, if we see lengthy highs, strength is indicated. If a sharp downturn occurs the sentiment is weak.
Crowd movements are a lagging indicator, so basing your investment strategy on what the momentum of the stock market will often lead to selling low and buying high. I want to remind you of a very recent time—the COVID pandemic of 2020—when the market plunged 30-35% only to experience a V-shaped recovery weeks later with record-high closings. This was all while a large portion of the U.S. economy was shut down resulting in effectively zero economic activity. The dichotomy between the market index highs then versus what was actually happening in the U.S. economy is a good example as to why using this index to guide you on how to proceed with your portfolio can be a wild goose chase. It was the investors who simply stayed the course who made the best choice during that turmoil.
10-Year Treasury Yield
In the investing world, 10-year treasuries are considered “risk-free,” the assumption being the U.S. will not default on its debt. This means that when investors feel “nervous” about the economy, they will put their money into these bonds in lieu of into the equities market.
Just like any other market force, the treasuries’ return changes based on demand. If the sentiment is that the market is weak and investors want to park their monies into these bonds, the U.S. government does not need to pay nearly as much to entice investors—yields are low. However, if the sentiment is that the equities market is going to grow, treasury yields become much less attractive compared to equity returns and the U.S. government must raise rates to make them more viable for investors who would likely put their money in what they foresee as a higher earning equities market.
Just as with the total market index, this indicator is not always determinative of what will happen in the future. As recently as 2022-2024 there was what was called a prolonged inversion of the yield curve. This simply means that short-term yields exceeded the 10-year yield (shorter-term bonds were paying more than long-term bonds). The belief is that an inverted yield curve indicates that investors feel the near-term economy will contract but in the long term they are more more optimistic. Talking heads often point to inverted yield curves as an indicator that a recession is coming. However, during the period of 2022-2024 the U.S. experienced robust economic growth and maintained a low unemployment level. As you probably recall, that period was full of alarmist economic coverage predicting the looming downturn that never came—once again illustrating that no single indicator should drive dramatic short-term changes.
What Moves to Make and When
The key to success with investing is to understand you cannot outsmart the market. It is an environment of billions of inputs all based on different events, sentiments, and realities. Using these indicators or others to make in-the-moment investment changes is not a winning strategy. Instead, use economic data to prepare yourself mentally to stay the course. The only adjustments you should make along the way of your investing journey is to keep a healthy cash reserve level. This cash reserve level is based on your own personal situation and should be updated and adjusted based on your current and potential future needs—NOT short-term market news or cycles.
At the end of the day—it’s simply time in the market, not timing the market that works for investors who want to grow their money successfully.
This article was originally published on my Substack November 13, 2025.
Successful Investors Don’t Listen to Stock Market Highs or the 10-Year Treasury Yield by Jenny Logan
Market indicators enticing you to make changes to your investments might be the biggest threat to your long-term success. Read on Substack