Quarry Hill Quarterly Review: Harry Potter, The Boggart, & Our Own Fears — Quarry Hill Advisors

Investment outlook

Watch our latest quarterly review video for a comprehensive analysis on navigating market turbulence and the strategic opportunities it presents.

The second quarter was one straight rally.

• U.S. stocks (SPY) +10.8 %
• Developed‑market stocks (EFA) +11.3 %
• Emerging‑market stocks (EEM) +11.1 %
• Core bonds (AGG) +1.0 %

Yet those numbers hide a key insight.

Between Feb 20 and Apr 8 the S&P 500 tumbled almost 19 %. The culprit wasn’t recession data or an earnings collapse. It was a self‑inflicted tariff scare. When the bond market started to wobble (the one thing that terrifies every politician), the White House suspended the tariffs, and the S&P 500 delivered its biggest one‑day jump of my career—almost 8 %!

It all happened faster than the COVID crash and rebound. Blink and you missed it. But if you didn’t blink, you probably felt your pulse quicken.

This situation reminds me of a scene from Harry Potter.

​Harry Potter, The Boggart, & Our Own Fears

Ben Felix said: “It’s never the drop in stock prices alone that makes crashes scary. It’s the narrative that goes along with them.” Many of us can say “I would have no problem with watching my portfolio go down by 20%." However, it’s not the number that scares us most of the time.

It’s the narrative.

It’s the Boggart.

In Harry Potter and the Prisoner of Azkaban, Defense Against the Dark Arts teacher Professor Remus Lupin wheels an ancient wardrobe to the front of the classroom. Inside lurks a Boggart. It’s a shape‑shifting creature that has no form of its own. The moment the wardrobe door opens, the Boggart scans the room and instantly transforms into the greatest fear of the person standing closest.

So Neville Longbottom watches it morph into Professor Snape, towering over him and snarling. Parvati Patil shrieks as it twists into a seven‑foot cobra. Ron Weasley, who despises spiders, is confronted by an enormous black arachnid clicking its pincers.

The markets work the same way. Eventually, your portfolio will fall, maybe not by much, but it will fall because of the thing you fear most.

So how do we deal with this?

• First, you need to name your Boggarts. What is it that could make you hit the sell button? A war? Another pandemic? A politician you hate?
• Second, you need to think about how long it will take for that event to resolve. 4 years? 5 years? 7 years? Then, let's make sure your war chest of cash and bonds can get you through this. Entrepreneur Derek Sivers was once given the compliment: “Derek, what I really admire about you, is you can always speak your mind without fear. How is it that you can do that?” Derek responded, “Well…I think it's because I have $500,000 in my checking account.”

Do you have enough cash?

Is your bond war chest big enough?

Do you have too much debt?

Or maybe you just need to not watch the financial news.

Investor Bruce Berkowitz always says. Cash is financial valium.

I can’t tell you when or what mask it will wear. But perhaps it will be one of the things that you fear most.

“Every past market decline looks like an opportunity; every future decline looks like a risk.” — Morgan Housel

Thanks for reading, and as always, reach out if your Boggart feels closer than arm’s length.

-A note from Bjorn Amundson, CFP®

This material is intended for educational purposes only. You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. Nothing contained in the material constitutes a recommendation for purchase or sale of any security, investment advisory services or tax advice. The information and opinions expressed in the linked articles are from third parties, and while they are deemed reliable, we cannot guarantee their accuracy.