Double, Double, Toil & Trouble

This often misquoted line comes from the play Macbeth, written by William Shakespeare (1611).

This line pops up as a refrain during Act 4, Scene 1 of the play. The three witches that predict Macbeth’s future are standing around their cauldron throwing creepy items into the pot to make their spooky brew. All the while, they chant, “Double, Double, Toil and Trouble” over the simmering concoction.

This line is often misquoted as, “Bubble, Bubble, Toil and Trouble”. Sure, it makes sense that these wicked witches are telling their cauldron to “bubble,” which is another way of saying, “simmer” or “boil.” The only problem is, that’s not what they say in the play as Shakespeare wrote it. Instead of commanding the potion to “bubble,” they’re asking it to “double the trouble” that it’s going to cause. Mainly the trouble that it’s going to cause for Macbeth.

I was inspired to think about this portion of the play as the investment volatility has increased over the last few days. In fact, both versions of this line – the correct one from the play, and the misquoted one – could be applicable to today’s investment market climate.

Recent Sell-Off

The recent sharp sell-off in the equity and income markets is, in large part, due to some of the risks that have been simmering (or bubbling if you will) under the surface of the markets since the start of the year, but have largely been ignored as the market moved higher. Many of these risks have been present for some time (slowing economic growth internationally and domestically, lower future corporate earnings, rising corporate, personal and government debt levels and stretched valuation levels in virtually all markets) slowly boiling under the surface. The double trouble combination of the Federal Reserve taking a less accommodative stance with its latest interest rate policy move and the potential escalation of the trade war with China have caused the heat on the stove to rise to a point where these issues have suddenly come bubbling to the top of the brew in the past few days.

The unknown at this point is whether this recent bout of increased volatility, and the acknowledgement of these underlying issues, which has caused weakness in the equity market and the flight to safety in bonds driving down interest rates, is just a temporary correction or the start of a longer term downtrend.

No one has the answer to that question.

Are you subjecting yourself to undue uncertainty and volatility by allocating too much of your portfolio to equities?

This is especially important if you plan to retire within the next 5 years. You should take the opportunity presented by this most recent wake-up call of increased volatility to examine your portfolio allocation and ensure it is designed to provide the correct balance of growth and income for the long term. (Read 5 Reasons You Should have a Portfolio Review) If the current weakness does morph into a longer term downtrend, waiting may be very costly.