If we want to look like a brilliant stock market forecaster, all we have to do is to prophesize the same thing repeatedly until it happens. Regrettably, far too many stock market newsletter publishers and self-proclaimed gurus use this marketing tactic. In my opinion, to be a successful investor, we do not need gypsies with crystal balls, soothsayers wearing wizard hats, palm readers and stock market pundits with sketchy records of accomplishment. Sadly, these doomsayers tend to get far more attention than more authentic analysts who refuse to play the prediction game and openly tell us they do not know what will happen next. The folks who have been predicting a market crash year after year deserve no credit for finally stumbling on an accurate forecast. The way I see it, often in the real world, it is the brave and bold who get ahead, and not necessarily the intellectual. Nevertheless, I understand the temptation to believe in doom and gloom, as folks are still emotionally shattered from seeing their wealth cut in half twice; once in 2000 and again in 2007-08. Therefore, it is easy to understand that, according to the Federal Reserve Board analysis in 2015, 55 percent of Americans have no money in the stock market!
It takes great courage not to allow rumors about the looming collapse of stocks to affect our decisionmaking. Our human survival instincts teach us to look for danger that may be lurking behind the trees, while our social disposition encourages us to be knowledgeable when others may not. Said differently, we want to be the highly valued and respected person who warns others of danger. This primitive nature is precisely why there are boatloads of so-called experts willing to give us their Armageddon opinion. The psychology is easy to understand. Stock market declines – which, as we know, are normal and expected – are by nature disorderly and create a contagion of fear. Moreover, investors often believe that when stocks are nose-diving, there is something “the market knows” but they do not. Consequently, they begin to feel stupid, perhaps as some suggested I did back in 2008 when I stayed the course and weathered the brutal 37 percent decline in stock prices. I am sure that many of my clients felt, at that time, as if we were the only ones silly and naïve enough to maintain our investment strategy during an economic collapse.
Maybe I am too much an optimist, but I steadfastly believe what the consummate visionary, Winston Churchill, said about being an optimist: “It does not seem too much use to be anything else.” Little did we know that the stock market would eventually bottom in March 2009 and then proceed to more than double during the next five years! While past performance is not indicative of future results, in the final analysis once again, the 2008 debacle proved that indeed perceptive investors know that the seemingly worst of times can potentially be a time to make money. When everyone else is too afraid to act, they pull the trigger, or if they are fully invested, they stay the course. Nonetheless, after the dust settled and calm heads prevailed, my clients and I did not look so irresponsible and inexperienced, but possibly courageous and confident.
If we are looking for reasons to be concerned about a potential stock market decline, there are plenty of reasons to light our fuse. What most people do not understand is there are always reasons that now is not the time to invest in stocks. Do you remember the bird flu that made headlines in 2006? The unrelenting news coverage of the outbreak was a classic example of getting the heebie-jeebies, as the flu virus could kill tens of millions of people worldwide. Then, of course, there was the Ebola scare in 2014? More heebie-jeebies! The list goes on and on. Fear sells, plain and simple.
It appears that every time the stock market heads south for a time, too many folks think, “Is this it? Is this what the doomsters have been predicting? Maybe they are right and this time is indeed different. I cannot afford another decline like 2008. Maybe I should hit the eject button.” I only have 10 words for you that I steadfastly argue will serve you well: “Do not succumb to the siren song of the naysayers.” ’Nuff said. Cheers!
Harry Pappas Jr., CFP®
Certified Estate and Trust Specialist™
Certified Divorce Financial Analyst®
Pappas Wealth Management Group of Wells Fargo Advisors
818 A1A N, Ste. 200
Ponte Vedra, Florida 32082
The use of the CDFA™ designation does not permit Wells Fargo Advisors or its Financial Advisors to provide legal advice, nor is it meant to imply that the firm or its associates are acting as experts in this field.
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This and/or the accompanying statistical information was prepared by or obtained from sources that Wells Fargo Advisors believes to be reliable, but its accuracy is not guaranteed. The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. Any market prices are only indications of market values and are subject to change. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.