It happens every July, without fail. No, not the 4th of July celebration. I’m talking about Shark Week! Since 1988, the Discovery Channel airs a week-long TV programing block featuring, you guessed it—sharks! Turns out that in 2015, there were 8 shark related fatalities in the world. We are terrified of these creatures and the graphic images on the screen only help to stoke our fears.
When we think of elephants, on the other hand, we see peaceful, gentle giants, ambling along the African landscape looking for a watering hole. Yet over 500 people die annually from elephant attacks! In fact, more people died last year (12) while taking “selfie’s” than from shark attacks!
Could it be that our fears are misplaced?
I see many parallels in the stock market today. It certainly feels like we have a 100 year flood about every four years. Add to this, fears of rising interest rates, dropping oil prices, volatile markets, middle-east tension, China’s economic weakness, and the entertaining (if not interesting) election year, and we now have all the components for uncertainty, which markets simply do not like.
Have you tried to ignore these headlines? It’s not easy. The news media reminds us, literally every eight seconds with a news flash, or twitter feed that pops up on our cell phones anywhere on the planet. So we cannot possibly escape the equally scary images of imminent financial doom streaming in real time to our devices.
Unfortunately, this leaves little time and space to hear about the truly amazing things that are happening in our world. Consider the advances in modern medicine and genetic sequencing. For the first time in our history, we can understand the role of inherited disease and create better diagnostics and therapies, leading to much longer and healthier lives. In fact, according to the Social Security’s 2007 Periodic Life Table, the joint life expectancy of a couple age 65, is 89 years (and rising). And who would have thought that we would be paying $1.59 for a gallon of gasoline in 2016 from the perspective of 2006? How about the smart phone in your pocket (or on your wrist)—you now have more computing power in your hand than existed on the entire planet in the 1950’s! With these advances come a more efficient, affordable, and comfortable lifestyle than we have ever enjoyed before.
It is no fun to experience market fluctuations, especially in the face of dire headlines and news reports. John Templeton once quipped that the four most costly words ever spoken were “this time it’s different.” Yes, it certainly feels like it—as it did during the financial crisis of 2008, and the horrific months following 9/11/2001, and who can forget Y2K? Remember the planes that were supposed to fall out of the sky? Then there was the mini-recessions of 1994 and 1992. And Black Monday in 1987. And Bay of Pigs, and on and on, but you get the point. It does feel different now only because we have forgotten what it felt like in the last downturn.
By the way, the S&P 500 Index* was at 117.3 in January of 1982. It closed at 1880.33 on January 15, 2016. By contrast, a postage stamp in 1982 cost 20¢ and is now 49¢. The devastating effects of inflation, over time, is arguably a much greater threat than short term market volatility.
The headlines that we see today are just as full of doom, and yet somehow we have managed to prosper despite them. Like the shark attacks, our eyes are pulled to the most terrifying threats and away from all the wonderful changes and opportunities that we have today. Certainly there are challenges, but betting against 200 years of economic history in the good old U.S. of A has always been a bad bet.
And so the appropriate actions are to review your plan, understand your portfolio and time horizon, and avoid the temptation to make an emotional decision out of fear. If you have some extra cash laying around, it might just be a great opportunity to put it to work.
And remember, those fins you see just may be dolphins!
All the best in 2016!
Mark became a financial advisor in 1989 and obtained his CERTIFIED FINANCIAL PLANNERTM designation in 1995. As an independent advisor with LPL Financial, he serves clients through comprehensive wealth planning and investment management.
Mark is a former adjunct faculty member of Baker University where he taught graduate and undergraduate finance and economics courses for nearly ten years. Mark has been featured in several publications regarding financial advice and is a regular speaker with various civic and academic organizations.
Mark received his undergraduate degree from St. Mary of the Plains College in 1984 and MBA from Pittsburg State University in 1988 after working in the banking industry.
*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.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
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