Stocks are down. Bonds are down. Heck, let’s throw in real estate securities and commodities as well because you know what? They’re down too. It’s fashionable again to be worried, very, very worried. About the markets, about the economy, the Bank of Japan, the Bank of England, the price of corn, China and most anything else you might like to worry about. It’s fashionable once again to log in to your investment accounts and feel a tightening of the chest, “my goodness how could it drop so far?”. It’s fashionable to show some pictures on the front page of worried, exhausted stock traders slumping over their desks or holding their heads in their hands, shoulders sagging, faces lined with despair, and, you guessed it, worry.
I met with a client last week, a smart successful woman who is extremely good at what she does. She owns stocks as part of her diversified portfolio. Her comment? “The stock market really makes me irritated”. And today I’m with her on that one, I’m a bit ticked off myself. Here it is finally summer, vacations are on the calendar, boats are happily bobbing in the lakes and oceans, huge super-moons are lighting up the summer evening and we’re just past the solstice with the longest days of the year. And what does the market do? Drop. With no apparent consideration for mine or your vacation, no gracious postponement or sideways motion until fall. I admit it, I’m irritated.
But one thing I’m not, particularly, is worried. And why not?
First because we knew this was coming. Markets go up and down and then up again. Since Thanksgiving we’ve been moving on one direction, one glorious happy direction. And in a moment that has all changed. But it’s the same as it ever was. For different reasons and with a different backdrop of punditry, current events and precipitating causes. This particular weakness, this onset of worry, was caused by Bernanke’s announcement that he just might stop the bond purchase program if all goes well with the economy and if unemployment gets close to his 6.5% target.
Second because the ostensible reason for this particular bout of the heebie-jeebies was, at bottom, the idea that our economy is getting stronger. We’re not poised on the edge of a 2008-like event with financial meltdown and carnage galore. Rather we’re witnessing the healing from that very same recession, with the economy finally getting back on its feet. That makes me glad rather than sad.
I imagine we’ll see more market jitters as we move through the summer. There will be bad news from the emerging economies, troubles in Europe, endless recrimination about the past and prognostication about the shape of things to come. All of this will underscore the notion that we can’t predict the future with any certainty and that the market seasons change just like the weather and cycles of the moon. We’ll continue to do what we do, keep an eye on security valuations and pay attention to those fundamentals that guide us toward reasonable investment strategies and a reasonable price.
Our advice would be to not pay overmuch attention to your brokerage statements and perhaps take a pass on your financial news show for the time being. Your stock shares will all be there in the fall. Remember that you own shares of the great companies of the world and that your strategies are somewhat long term in nature. All this will work its way through over time.