Winning More Than You Lose: What Tennis Teaches Us About Investing
By Dr. Robert Votruba
With all the uncertainty in the world, many investors are asking a fair question: Why is the market at all-time highs?
So far this year, the S&P 500 has notched more than 30 record closes, an impressive run, especially considering the backdrop of sticky inflation, trade tensions, and a government shutdown. Historically, markets have hated uncertainty more than anything, yet this year has been a reminder that they can often look past it when the underlying story is one of strength.
There are several factors driving that strength.
1. Interest rates are falling. The Federal Reserve has begun cutting rates and signaled more to come. Lower rates ease borrowing costs for businesses and consumers alike, while also lifting the relative appeal of stocks and bonds. Historically, falling rates have been friendly to both asset classes.
2. Corporate earnings and profit margins are at record highs. Some of this improvement can be credited to productivity gains from artificial intelligence, which have boosted efficiency across industries.
3. Business investment (capital expenditures) in AI continues to surge. Companies are spending heavily to integrate AI into their operations, fueling innovation and potentially setting the stage for the next leg of productivity growth.
4. The recent move to make certain tax cuts permanent has also acted as a tailwind. Some of these changes will effectively serve as a stimulus when refunds and withholding adjustments flow through next year.
5. The rise of the individual investor. Thanks to the growth of 401(k)s, more individuals are participating in the markets than ever before. It’s estimated that 62% of U.S. households own stocks[1]. Evidence shows that, unlike in the past, lately this cohort has been less reactive to short-term volatility and less likely to panic-sell during downturns—a stabilizing force in today’s market structure.
Reasons for Caution
While the overall backdrop remains constructive, it’s important to recognize that risks persist.
From a valuation standpoint, stocks are anything but cheap. The S&P 500 has never been more concentrated in its largest names, and the “Magnificent 7” continue to dominate market cap weighting.
There’s also the issue of tariffs. The average U.S. tariff rate now stands around 19.2%[2], the highest level in roughly 70 years. So far, businesses have largely absorbed these costs, but eventually, they may be passed along to consumers, potentially rekindling inflationary pressures.
Debt is another growing concern. The U.S. government’s debt burden continues to climb, but we’re hardly alone; many developed nations face similar fiscal challenges. As one economist recently quipped, America remains the “cleanest dirty shirt” among its peers.
Adding to the list of uncertainties, the federal government entered a partial shutdown this quarter. While headlines around shutdowns can sound alarming, history shows their market impact has been negligible. Since 1976, there have been over 20 shutdowns[3], and the S&P 500 has averaged a modest gain during those periods.
The Fed’s Balancing Act
The Federal Reserve remains at the center of the market narrative. With inflation still above its 2% target but signs of weakness in the job market, the Fed faces a delicate balancing act between its dual mandate of price stability and maximum employment. Recent commentary suggests that policymakers are now prioritizing the employment side, signaling additional rate cuts to cushion the labor market and broader economy.
However, the Fed’s independence, long viewed as a cornerstone of U.S. economic stability, is being increasingly challenged. As growth slows and political rhetoric heats up, there’s mounting pressure for the Fed to lower rates more aggressively, putting policymakers in a difficult position and raising questions about how long they can maintain their impartial stance.
While this development is concerning, it is not without precedent. Consider that in 1965, it was reported that President Lyndon Johnson physically shoved then Fed chairman William Martin around his living room while pushing for rate cuts.
Even with all these moving parts, trying to time the market is rarely rewarding.
On April 9, the S&P 500 surged more than 9% in a single day - its third-best day since the index’s inception in 1957. Missing just a few of these powerful days can dramatically erode long-term returns. And yet, many investors allow their political leanings or short-term concerns to guide their decisions, often exiting the market at precisely the wrong time.
The lesson isn’t new, but it’s worth repeating: staying invested beats guessing. Riding out dips is the price we pay for long-term rewards. It’s worth noting that, over the past 40+ years, the S&P 500 has experienced a decline at some point every year, including a 19% drop earlier this year.
Tennis, Markets, and the Power of Staying in the Game
Consider Rafael Nadal at the French Open. During his legendary 17-year run, he captured 14 titles, winning 112 of 115 matches—a stunning 97.4% win rate. Yet across those matches, he won only 54% of total points played[4]. Even the greatest champions lose nearly half the time, they just win the right points.
Since March 9, 2009, the S&P 500 has been up on 55% of all trading days—almost the same percentage. The lesson? Markets, like tennis, reward persistence over perfection. You don’t have to win every point; you just have to stay in the match.
Looking Ahead
History offers some encouragement. The fourth quarter has traditionally been the strongest for stocks. Since 1928, the S&P 500 has averaged a 2.9% gain in Q4, with positive returns 74% of the time, a notable contrast to the roughly 60% positive rate for other quarters. While history doesn’t repeat perfectly, it often rhymes.
Timeless Principles Still Work
This year has once again reinforced the enduring value of two fundamental strategies: rebalancing and diversification.
- Rebalancing keeps portfolios aligned with investors’ risk tolerance and forces disciplined behavior, selling what’s done well and buying what hasn’t. It’s the ultimate “buy low, sell high” mechanic.
- Diversification has paid off as well. While the Magnificent 7 have captured the headlines, international stocks have outperformed U.S. equities by a wide margin. Valuations abroad remain more attractive, and non-U.S. exposure provides a natural hedge against the U.S. dollar, which is down roughly 10% this year.
- Bonds have quietly delivered steady returns, over 6% year-to-date using one common benchmark. After spending much of 2008–2021 near record-low yields, bonds now offer attractive income and could benefit further if the Fed continues to ease policy.
Closing Thought
Between 1991 and 2016, the world’s #1 ranked tennis players won between 53% and 56% of all points each year[5], barely better than even. Yet that slim margin was enough to dominate their sport. Investing works much the same way: success isn’t about winning every trade or predicting every move, it’s about staying disciplined and capturing the compounding that happens over time.
Just as in tennis, you don’t have to win every point—you just have to stay on the court.
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. National Financial Network is not an affiliate or subsidiary of PAS or
Guardian. CA Insurance License Number - 0D23495. Data and rates used were indicative of market conditions as of the date shown. Opinions, estimates, forecasts and statements of financial market trends are based on current market conditions and are subject to change without notice. Opinions mentioned are the authors. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. Past performance is not a guarantee of future results. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Indices are unmanaged, and one cannot invest directly in an index. Past performance is not a guarantee of future results.
Market data provided by: J.P. Morgan Asset Management, Wall Street Journal, Barron’s, Standard & Poor’s
8465876.1 Exp 10/27
[1] Gallup News
[2] U.S. International Trace Commission, J.P. Morgan Asset Management
[3] NBC News
[4] Association of Tennis Professionals (ATP) Tour
[5] Association of Tennis Professionals (ATP) Tour
