Is there such a thing as market seasickness? That feeling of being dashed on the deck of the ship as the waves smash against you is quite real. Between political tension, bleak headlines, rising fed rates and disappointing earnings, how can we have confidence in something so out of our control?
Fair question, but investing has always been an emotional ride, right? Questioning and distrust are necessary parts of the total experience we go through. They help us recognize our own personal limits and even find those painful breaking points. This, strangely enough, is an important part in the journey. Without panic points and limits, you would never be able to gauge your shift back into confidence and trust.
Life moves like a ship on the sea. Some days are bright and calm with the wind at your back, while others can be a maelstrom ripping at your sails. You need one to appreciate the other, but if we chart our course and plan well we can expect more sunny days than sinister storms.
Know the Lingo:
Efficient Market
An assumption in financial economics that current asset prices reflect all publicly available information. This theory asserts that stocks always trade at their fair market value.
Disposition Effect
Our tendency to prematurely sell assets with a gain, while holding onto assets that are losing money
Behavioral Finance
The study of the effects of psychology on investors and financial markets
Making Peace with the Beast
Rather than rehash why the market seems like a crazy beast right now, let’s zoom out for a second and talk about the bigger picture.
Have you ever tried to figure out how these markets actually work? There are so many forces at play: supply and demand, world governments, wars, pandemics, high-powered companies, innovation, cheaters, insider trading…the list is endless. There is also a never-ending flow of information passing through our fingertips, eyes and ears. Can markets really process all the information efficiently?
Let us know if you ever figure that out since the answer may be a resounding “I don’t know. Maybe.” What is true is that most of us are relying on it in some form for the blueprint of our financial lives. We have to trust it. And that is sometimes a very difficult thing to do.
Our behaviors and emotions can be extreme when it comes to our money. The intimate relationship with the mighty dollar gives it power over us – and sometimes it offers comfort and protection while other times it dominates and hurts. Did you know the pain of losing is twice as painful as the joy of gaining? (see link below).
Three Reasons to Still Trust the Market
Right now, believing in the markets may feel like an act of faith, even courage, but here are a few facts to remember that will help you keep your emotions in check.
#1: Markets have always been uncertain
We have seen ups and downs before. Made decisions in the face of the unknown. That’s the nature of this beast. We never know what companies are going to be reporting on their quarterly earnings, or what a superpower like Russia is going to do overseas. Yes, the market has bad years and we are neck deep in 2022 already, but take heart. The grind will end sooner than you think.
Panic never helps.
#2: Investing has treated us well overall
If you have been in the markets at any point, then you have made money. Some companies do fail, but most succeed and share prices rise. The machine needs to eat companies and this capitalistic cannibalism will continue. Always has. Always will. But overall the machine still turns for the greater good and the benefit of all of us. Consider that from 1989 until 2022, the Standard and Poors, a collection of America’s largest companies, has made an increase of 1000% when adjusted for inflation. Go back to 1923, and—inflation-adjusted—you would see a return of 100,000% on your monies!
#3: There will be sunny days ahead
Right now, we’re in the boat, in the middle of the maelstrom. That’s always when people question their decisions the most. But this is also when experience is put to work and trust, sometimes blind trust, has to be instilled. A trusted and strategic advisor needs to be with you. It’s hard enough to steer your ship in the storm, but a nightmare to go at it alone. Push through this with a friend, Reddit group, family member, or financial advisor. And when you get back into the sun, take the time to appreciate it.
Leaning into the Winds
Be brave and keep the financial faith that these market forces are short-lived. In times when you feel out of control and wonder what you can do, sometimes the best course of action is to do nothing.
In the long run, we will be okay and our finances will survive. Investing in this complex world is necessary. TradeWinds will be there with you during these stormy times and fight to keep you on a steady course.
Learn More
Not all the news is negative – it’s just that bad news sells better. Balancing that out with positive truths will help you stay calm and cool…
- Go here to learn why our minds are wired to make bad $$ decisions
- Read this to see why the Market Outlook still has promise
- Email us here to set up time to talk to a TradeWinds Advisor
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