In a year like 2016 — in which equity markets plunged and then bounced back to flat all in the first quarter — portfolio managers are often asked where opportunities lie in “up” or “down” markets. For the Invesco Diversified Dividend team, however, that’s simply not the way we look at the world. Performance for a manager may be great in either a bull or a bear market, but it’s the ability to add value over both that we believe is most important.

As previously explained in this series, investors who follow Hollywood’s lead and suspend disbelief may very well overlook the potential downside risk of a profit cycle in its later stages. But to avoid misunderstanding the market, it’s important to balance the concerns I’ve previously addressed in the first two parts of this series with supporting factors for the market.

While investors may be riveted by Hollywood’s surprise endings and cliffhangers, they generally aren’t fond of unexpected plot twists in the market. So here’s a spoiler alert. The operating results of companies in the current cycle have been quite strong, and many investors expect this to continue. But we’ve seen enough plot twists over time to know this can be a risky assumption.

When Hollywood tells a story, the expectation is that viewers are willing to suspend disbelief to fully immerse themselves in the plot. But when the market tells a story, suspending disbelief may result in overly complacent investors who blithely ignore the potential downside risk of a profit cycle in its later stages, which we see today through the lens of our full-cycle perspective.

Because the market is a forward-discounting mechanism, its not unusual for it to have led the economic recovery over the last four years. Today, I believe the market has already discounted a decent economy over the intermediate term and is approximately fairly valued. But thats not the whole story.