Climbing A Wall Of Worry

It is often said that stock markets climb a wall of worry, since historically the market has gone up, yet it continues to cause anxiety. This year is no exception; the S&P is up about 15% year-to-date (through September). A strong stock performance despite the Delta variant, extreme political partisanship, debt and inflation concerns.

Investors become uneasy about volatility even when there isn’t any (such as in 2017). Absence of volatility may make us concerned about complacency or what we might be missing.  In other words, there is always a reason for investors to worry about something.

Worry is an interesting concept. The uncertainties and anxieties felt today trump anything in the past because we are living and working through them. This may cause us to overweight these concerns and could result in a myopic view of the future.  Given the time horizon for most investors, it’s advantageous to maintain a long-term perspective.

Concerns – Past & Future

What did investors worry about in 2019? How about 2018? The stock markets were negative in 2018, so we probably worried a lot, but can’t remember. That is because worries tend to work themselves out. We adapt and adjust to our changing circumstances, especially the bad ones.

What will we worry about next month or next year? It could be a continuation of present concerns, or it could be something entirely different. But it will be something! In our experience, we have seen that investors who focus on the “worry of the day” experience greater stress and are more likely to make an unwise investment decision.

Unpredictability is part of the markets. It’s our job to develop strategies to help mitigate worry for our clients. One of our greatest values is as a resource to help talk you through the short-term volatility topics and decide, for your personal situation, if they are even worthy of your attention.  As always, if you have any concerns, we are available to speak with you.

Source: ©2021 Behavioral Finance Network. Used with permission.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly.