One of my jobs as a parent is to keep the peace in my house. Now with six of us under one roof, it’s a full-time job. But with no teenagers, it’s still doable. My oldest is turning twelve this weekend though, so one year from now I’m in trouble. From what I’ve seen, managing teenage “unrest” on a daily basis looks daunting. (Future teenagers in Sunriver, OR below)
Then I remember I’ve been training for this for the last 18 years! As an advisor, and as investors, we manage unrest every day. We are constantly confronted with drama kings and queens and their headlines. My job is to keep my cool and not overreact, and help clients do the same.
Like burning the house down when a teenager makes a mess, or putting them up for adoption when there’s a disagreement, overreacting in your portfolio, and selling everything because it went down, can keep you from the long-term gains we’re all trying to realize.
Take the latest dramatic headlines of Political Unrest, Worker Unrest, and Geopolitical Unrest. How do we process all these and not overreact? A good investor (and a good parent of teenagers) would calmly take these issues one at a time:
Political Unrest: The latest government shutdown that dominated the headlines two weeks ago was avoided. However, it resulted in the Speaker of the House being ousted. Today we have a new Speaker nominated, but the unrest-creating headlines will be back shortly as the next government shutdown looms in mid-November. Will the stock market drop?
Time can help us outrun drama like this. These types of shutdowns will eventually be resolved. The last one was in 2018 and lasted 35 days. What did the stock market do? It went up, not down.
Worker Unrest: Auto workers, medical workers, and other workers are striking across the nation for better pay and benefits. Autos were already in short supply and medical staff are stretched thin. Will the economy see the effects of these disputes?
Maybe. Employees are trying to pay for increased costs at home and employers are desperately trying to keep costs down at work. Both sides cannot stay out of work for long and the disputes will likely end in compromise. The economic effects will likely be small and short-lived, despite what the news insinuates.
Geopolitical Unrest: The terrorist attacks in Israel are being labeled Israel’s 9/11. The loss of life cannot be quantified financially. The event was and is horrific. If Iran gets pulled into the conflict it will get much worse. Meanwhile, Russia and Ukraine are still fighting and China tensions remain high with all eyes on the island of Taiwan. Should we wait to invest until after all this is over?
How long will it take to end unrest between all nations, tribes, and tongues? I’m afraid it’s going to be a while. Tensions flare and headlines flash, sometimes pushing the stock market down, but then they fade and disappear only to be replaced by geopolitical unrest from another part of the world.
With so much unrest to process recently, it’s no wonder the stock market has been headed down the last few months. The S&P 500 is down about 6% since the end of July, but still up over 13% year-to-date. (See the year-to-date chart of the stock market below)
Investing, like parenting teenagers, is not for the faint of heart. We have to look into a future of what seems like never-ending unrest and find the courage to persevere. We have to manage the daily drama so we can experience long-term gains.
It’s not wrong to have strong emotions about serious events that have happened and will happen. We all have them. It’s acting and sometimes overreacting that can get you in trouble. Perseverance is what we need to regulate those strong emotions and keep us from doing things we’ll regret.
The perseverance to stay invested despite the unrest has resulted in financial gains in the past, and I expect the same will be true in the future.
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Thanks for reading,