When my boys were little, they were very fond of a book I’d read them titled “Alexander and the Terrible, Horrible, No Good, Really Bad Day.” Or some such ridiculous title.
It’s a timely title, if not a great book, for kind of days such as we’ve had lately in the stock market.
But investors must learn to live through such times as, tough as they are. They test one’s soul. I’ve said as much. For such times as these are, believe it or not, great spiritual exercises. Great opportunities for personal, spiritual growth. How real is our faith? In what do we hope? Are we strong? Brave? Resilient people?
For some of my readers, that kind of stuff may be irrelevant or even offensive at a moment like this when the market has plunged 10% in a week or so. But I would argue that my blog is not just about helping you make more money for your retirement, it’s also about how to live a rewarding and purposeful life. In pursuit of those goals, money is definitely part of the puzzle but it’s not enough. In those pursuits, money may even be irrelevant or dangerous. If our character does not grow along with our ability to endure – come what may – is money really important?
Ask Michael Jackson.
Or many other very rich successful celebrities who, for all their success, don’t seem to have figured out or worked out what it takes to have a truly rich, purposeful, contented, successful life. It takes character. And such times as we investors are experiencing right now, painful and scary though they are, are important crucibles in which stamina and grace are forged under pressure.
So hang in there. Enduring this nastiness in the markets will be good for your future and your wealth, too.
On a more practical note, may I say that when markets fall as hard as ours have recently, it takes time to shake out the fearful and establish a tradable base. The horrors of Monday were followed by a bounce on Tuesday and maybe a hope that the worse was over. But in such cases, usually, there will be a test of the low. That was today, for sure, but I don’t know if we failed it yet. If we begin to rise tomorrow, then today may have been an “undercut low,” from which we will now begin to rise. But the normal rise from a 10% or so dive, such as we’ve experienced, is a long, slow process of feeling our way up, taking many weeks or months with lots of backing and filling along the way.
Suffice it to say, we have risen a lot since the fall of 2016, since Trump’s election, with hardly a hiccup down. Well, the bill for such non-stop euphoria has come due, as we should expect. Our markets are contracting and consolidating, yes; but on a very solid economic base, unlike 2008. There is much good, economically speaking, around the world, and here in the U.S. there’s more good coming from corporate tax changes, rising earnings, and more. But some market participants are stressed with the prospects of rising interest rates and inflation. These are not crushing specters amid a growing, healing economy. In the past, stocks have risen many times with rates rising, if the economy is growing. Ours is. Ours rates were kept too low too long to help our economy heal.
I am not now persuaded that the rate rise we’re seeing, from the low levels from which they are rising, is the death of this bull market as opposed to a sign of the growing health and resilience of our economy. In fact, not by a long shot do I think this bull market is over.
But one thing I want to add is that some of you may have too large an allocation of your retirement portfolio concentrated in stocks. Of course when they’re rising, I know, you can’t seem to have enough of them. But then, events like this month occur, and some of us get weak kneed and sell.
It may be time to re-examine your asset allocation – specifically, your stock allocation – if you’re losing sleep right now.