Every financial expert seems to have their own opinion or timeline as to when our economy will recover. One thing I have learned over the years is the economy depends about as much on economists as the weather depends on weather forecasters. I will not make any predictions as my intentions are to offer greater clarity by sharing my perspective and help reduce the fear that is widespread throughout Central Oregon, the United States and even abroad.
We are currently facing the most challenging economic period in our lifetime. To paraphrase Franklin Delano Roosevelt, who led us out of the Great Depression, I believe the main thing to be fearful about today is fear itself. Thoughts of doubt and fear never accomplish anything and never can! James Allen in his classic book As a Man Think states: “A man can not directly choose his circumstances but he can choose his thoughts, and so indirectly, yet surely shape his circumstances.” Obstacles are those frightful things you see when you take your eyes of your goal. As you contemplate your years of financial independence, it may be more important than at any time in your life to have a plan in place for your financial future as the road to recovery may be more of a crawl – rather than a sprint. We must be focused to squash the fear factor.
A Bear Market Is the Temporary Eruption of a Permanent Uptrend
Staying calm amid market turmoil is not easy. Fears of further decline can make investors feel skittish. Throwing in the towel can be expensive as the cost of missing a market rebound can be significant.
The key to making money in investments is not to get scared out of them. I believe that remaining fully invested in a highly diversified portfolio throughout volatile times will pay dividends down the road. Historically, the best equity market performance is generated in the first three months following the bottom.¹ As it is practically impossible to predict the bottom in a market, investors should remain invested or risk missing out on the period of highest performance and jeopardize attractive longer-term performance. Peter Lynch of Fidelity Investments states: “Which way the next 1,000 to 2,000 points in the market will go is anybody’s guess, but I believe strongly that the next 10,000, 20,000 and 40,000 points will be up.”
An Illusion of Linearity
It was only a few short years ago that our community was basking in times of economic glory as home prices were increasing in value on a weekly basis and retirement accounts were reaching new highs. Many expected this favorable trend to continue nonstop into the future. Following a similar pattern, as many people focus on their current challenges, they feel that these distressing times are here for good and we are experiencing a permanent downtrend. Much of our society seems to buy into this way of thinking but the world does not work in a linear fashion. History has shown us that the only constant in life is change. Market downturns are a natural part of our free market system. They have occurred throughout history and will continue to do so. In fact, since 1929 there have been 26 bear markets.² Eventually they all do come to an end. Downturns may later be recognized as part of a cycle that included years of slow and steady upward progress.
Graze on Good Grass
As we feed our minds with a barrage of negative news we only facilitate the prevailing pessimistic and destructive sentiment that currently prevails. This has certainly been evident during the election season that has thankfully come to an end! We should be cautious as to what information we allow to dominate our daily thoughts. Fear and pessimism unfortunately sell and the media is aware of this. I consider many of the financial networks to be economic pornography as they focus headlines that contain words like “panic” and “collapse”. Reacting to daily news may only create more turmoil for your long-term financial plans. Jack Welch compares many financial journalists to weather forecasters in a hurricane who become giddy as they describe the biggest storm in their careers. Their excitement is understandable, but much perspective gets lost in the fray.
For years, my wife and I have contemplated the idea of killing our TV. We were concerned of being disconnected from the world. We always kept up on current events and thought it was our duty to know everything happening around the globe as well as our community. We found ourselves going to sleep to the misery of the 11 o’clock news. During the night our subconscious minds would be pondering the last messages we fed it. In the morning we would flick on the news and start our days with this same negativity and gloom. A few years ago we finally pulled the plug on our TV. It was amazing how our lives shifted as we started focusing more on our family, friends and community.
As the media continues its barrage of bad news, we must remember we have been down rough and unchartered roads before. I suggest focusing more on family, friends, fun and even prosperity as what we focus on truly does expand.
David Rosell is President of the Rosell Financial Group in Bend. He is the Past Chairman of the Bend Chamber of Commerce and the incoming President of the City Club of Central Oregon. David can be reached at (541)385-8831 or www.RosellFinancialGroup.com
Investment advisory services offered through Rosell Financial Group, a State Registered Investment Advisor. Securities offered through ValMark Securities, Inc. Member FINRA, SIPC 130 Springside Drive, Ste 300 Akron, Ohio 44333-2431. 800 765-5201. Rosell Financial Group is a separate entity from ValMark Securities, Inc.
¹ Brinker Capital