The Antidote to Unknowable Markets
Have you ever listened to someone in Kansas City complain about the weather? “Welcome to Kansas City, and don’t worry, if you don’t like the weather, just stick around a bit, and it will change!”
Our Kansas City weather is volatile and unpredictable, which typically turns our weather-conversations into bash sessions on weather forecasters. “Why do they even make forecasts!”
We’re getting ready for a large, outdoor family wedding event in July, and two things are true:
the weather will have a huge impact on the party and
we have absolutely no control over the weather. All we can do is try to see where it’s going and do our best to plan accordingly.
If the weather does end up really wet, windy, or hot on that day, we’ll have limited options. All we will be able to do is make some minor changes to our plans and to make the most of what the weather gives us.
The weather is a “natural phenomenon''. Its patterns mostly follow scientific laws we observe. However, even in today’s high data processing world, there’s not yet a way to account for, and therefore predict, exactly what the weather will be at any given point at any given time.
Weather Meets the Stock Market
So, are we really surprised that the stock market and its forecasters aren’t any better when instead of matter subject to natural laws, we are dealing with irrational human decision making?
Yet many of us think someone should be smart enough to predict the economy and markets. But are you confident in making a forecast for the stock market tomorrow? How about over the next week? Next year? How about the next 5 years?
I believe that any honest financial advisor will be brave enough to confidently look you, his client, in the eye and tell the truth: “I do not know where the stock market is going in the short term.” If your advisor is not telling you that they are either naive, lying or afraid. I know I’ve been tempted (and actually been) in all of those places at some point in my career. Probably all 3 at the same time!
No humility should be required to admit, and accept, that we, nor anyone else, can consistently predict where the stock market is headed in the short term. But we know that humility is essential.
Consistent over-confidence in predicting markers has resulted in consistent pain for those who have put resources on the line. Sometimes that pain takes time to manifest. And it can be a very long time, which will make many who haven’t done the same start to reconsider their principled approach. “Maybe this time is different, perhaps markets are predictable. I don’t want to miss out!”
The bear market in stocks in 2022 is an invaluable reminder that principles are not constrained to any pre-ordained timeline. The unknown timing and outcomes are why principles exist If everything was clearly observable, principles lose their power. Instead, you just go with the flow of culture.
What’s our culture telling you right now?
“The economy is in real trouble, and heading for a recession.”
“The new normal for the stock market is much lower returns than previously expected.”
“You don’t have time for your assets to recover even if it does turn around.”
“The worst is yet to come.”
So What Should You Do?
First, ignore financial forecasting! This will not be easy because as we all know, information flows faster and more freely than ever before, so you must have an alertness to when you’re being targeted with certain messaging. This might mean changing your media habits, which is no easy feat, but it is possible, and it will be worth it. And this next tip will help….
Which is: fill the void with productivity. Many might read this as work more. Maybe that is what it means for you, but that depends on your definition of work. Truly, productivity can be much broader than work as we traditionally think of it.
Putting more time into your vocation (whether it be an engineer, consultant, physician, educator, or anything else) would certainly be productive, both economically and in the broader sense of using all of your time, energy, and skills well.
You might contend that you are retired or you hate your job, so it’s not helpful to pour more into your “work”. Okay, what about this:
A conversation with a parent or a grandparent you haven’t talked to in a few weeks could be very productive, albeit not economically meaningful. Tending your garden can be very productive, although the fruit of that labor will barely show up in financial statistics.
When we keep our attention on creating value for others in a variety of ways, we run out of time and energy to worry about matters outside of our control. It’s a wonderful trade-off. Valuable experiences are the point of the economy and investments anyhow!
It’s not enough for me, or anyone, to simply tell you: “you should really stop worrying about the economy and markets!” No one likes to worry, so if it were that simple, we wouldn’t be uptight about it in the first place. Instead, we must first take firm hold of the truth that no one can consistently predict the economy and markets.
You have to ask yourself if you really believe that? Or not?
If not, then you have a long journey ahead of you. Because if you do believe it’s true, then you won’t sleep well until you find the person, system, or philosophy that is the one that actually works at not only predicting where these things are going, but also knows how to profit from it. It’s the very opposite of simplifying.
If yes, you do believe it, then you can start to let that truth find its place in every worry, fear, and/or anxiety you have regarding your money and resources. In response, you can throw yourself more fully into the avenues in your life where you know you can uniquely create value for others. And please hurry, those people need you. And they need someone to help them take their attention away from how hot (or cold) the Kansas City weather is!
And as always, don’t hesitate to reach out to our advisors should you need assistance with your personal finances!
