Proverbs 29:25
The fear of man lays a snare, but whoever trusts in the Lord is safe.
In recent conversations, the topic of an Economic Recession has come up. During these conversations, I’m usually asked whether I think a Recession is coming and how badly I believe the Stock Market will react during this time. When these questions are presented, I tend to ask myself two questions. First, is this person simply wanting me to confirm their thoughts and fears, and second, is they someone who is a long-term thinker or are they someone who only looks at the short-term, instant gratification perspective? One may wonder why I go through this process when someone is just asking my opinion. I understand that these questions will come up when those around me know what I do. What I’ve noticed about these conversations has been typical and unfortunately unsurprising as well. Below are my observations.
Short-Term Thinking
While I know it’s human nature, I’m still amazed by how quickly we as humans forget. This is especially true in the world of investing. I’m often asked if I think the “Recession” is coming at the end of the or the beginning of next year. What I would like to say is “It doesn’t matter!” but I do my best to entertain the thought and move the perspective to how well markets have done during and after past Recessions. The chart below is a helpful reminder as to how the markets have rewarded those who stayed invested during and after a recession.
Confirmation Bias
This is especially true during tense political times. It’s no surprise that the political atmosphere is in a place that many of us have never seen. Depending on which side of the aisle we sit on, we can see and hear information differently. Many times, we only hear and see what confirms our pre-existing beliefs. I see this in my discussions. While I do my best to present the facts and remain neutral, the questions of government will enter the conversation. Using the same previous chart, we can see that regardless of which political party is in power during a Recession, investors have been rewarded on average 3.81% by staying invested. One year out – 21.25%. No history doesn’t guarantee the future, but we can all benefit from using it to help shape our perspective on what’s to come.
Fear
Somewhere in the middle of these conversations, the comment in some form is made “I’m afraid that this time is different.” My follow-up question is “Why?” “Why in over 100 years of investing is this time different?” In all honestly, I have yet to hear an answer that is truly different than any other “fear” from the past. While fear can be a positive motivation to act, if left unchecked, it can also cause us to act irrationally and in ways that are harmful to ourselves and to those we love. 2 Timothy 1:7 says, “For God gave us a spirit not of fear but of power and love and self-control.” So, while life is filled with moments of fear, it’s up to us to use self-control.
The great thing about this is that none of us are alone in the journey called life. Even in the world of investing, you don’t have to do it alone. Galatians 6:2 says, “Bear one another’s burdens…”. Fear can be a burden but that’s why we’re here. We’re here to help prepare you for times when fear comes and guide you through. We’d love an opportunity to sit with you, understand your fears and concerns, and work with you to create a plan that can give you a little peace.
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