The market a place of fear and greed
The last few weeks has seen the market throw its version of a hissy fit tossing stock prices to and fro, mostly fro however. Which is to say that most stocks went down. Not all mind you, as some things do tend to go up when things falls, bucking the trend of the majority of stocks. So goes the workings of Wall Street. Money, like energy is never destroyed. It just changes hands.
In any case, investors may have been shell shocked at the speed and breadth of the decline which likely decimated the balances of many portfolios. When markets go down and keep going down, it’s not a comfortable feeling seeing ones hard earned money evaporate in the smoke filled room of a stock market free fall.
They say the market is a place of fear and greed, and seldom is there a middle ground for simple common sense to calm a nervous nelly, a concerned spouse or a hard working family wage earner when witnessing dollars quickly disappearing down the rat hole of Wall Street.
If an investor knew that the market would eventually stop going down, he or she might take more comfort in the knowing such a fact, and in reality a fact it is. But now knowing when the market will stop falling can be mighty unpalatable for many.
One only has to look at a long term chart of the Dow or any index for that matter to witness a long but definitely interrupted line rising from left to right, basically meaning over time most things stocks generally tend to keep rising.
That the markets do tend to rise given enough time, at least historically, at times the period that makes up the rout can be nerve wracking.
Obsessive thoughts of “losing it all” tend to gnaw on the consciousness of many, causing lack of sleep, high blood pressure, anxiety and a host of other emotions that for the most part make life a miserable existence, at least monetarily, if not momentarily.
But those momentary moments can seem like an unbearable march through hell when markets refuse to stop falling, day in and day out.
That the markets over time have a rising shape to them when looked at through the decades, we must also note that there have been times when it took a very long time for the market to recoup the damage done in a major sell off.
During those long periods of waiting to break even again can frustrate investors as portions of their paycheck go into the black hole of an IRA or other stock account only to somehow disappear as balances stagnate or fall.
The imagination tends to a “what if” bias, meaning instead of the comfort of believing in optimistic outcomes, the mind tends to dwell on the worst case scenarios.
Trust me, we’ve all been there.
This is not to say I believe in “hold for the long term”. Indeed one could say that about real estate as well as stocks, but of course a decade ago, that didn’t turn out so well. I am of the opinion, had the Feds not rescued the 2008/9 economic implosion which in reality came close to destroying the entire financial system of not only the U.S. but our big round ball called earth, life on the planet would have changed for a very long time, and not in a good way. That is if you believe what the central bankers of the world told us as they showered trillions into almost every financial nook and cranny that bled red.
Without such a life raft, it may have been quite possible that entire fortunes would have been obliterated for good, along with millions of IRA’s, pension plans, life savings and what have you.
Some say the central bankers of the world could not possibly rescue us again if another catastrophe occurred of such magnitude, claiming they just don’t have their quiver of monetary arrows they had back then. Basically they shot a lot of them off the last time around and couldn’t repeat the performance even if they wanted to if faced with such an event.
I truly can’t say if that’s the case or not, but it does make one ponder a few things, none of which will help you sleep better at night.
We would all like to trust that the Fed and their global counterparts would have things under control should another market rout turn into an all-out freefall.
After all they had things entirely under control of things in 2008 and 2009 right?
Or did they?
This article expresses the opinions of Marc Cuniberti and are opinions only and should not be construed or acted upon as individual investment advice. Mr. Cuniberti is an Investment Advisor Representative through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Marc can be contacted at SMC Wealth Management, 164 Maple St #1, Auburn, CA 95603 (530) 559-1214. SMC and Cambridge are not affiliated. His website is www.moneymanagementradio.com. California Insurance License # OL34249