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  • Writer's pictureBrock Williamson, CFP®

Crises in Context

One thing investors can count on is that they will hear numerous reports economic and market crises throughout their investment experience. Some of these will be actual crises; the majority will be nothing more than noise.

The crisis du jour, as spewed by the financial media, pertains to predictions of an upcoming recession and bear market. Such news often results in investors becoming anxious, stressed, and itching to do something to protect their accounts. That is seldom a profitable move. “Far more money has been lost by investors…trying to anticipate corrections, than has been lost in the corrections themselves.”

-Peter Lynch

When faced with a crisis, or fears of an upcoming crisis, the best thing to do is take the long view and put the purported crisis in context.

For instance, when it comes to talk of recessions, we saw similar headlines as we see today in 2014, 2015 and 20161. Not only did recessions not materialize at those times, but the market is up significantly from those faux crises.

For the next “crisis”, just remember to take a step back and put it in context. We have had many real and faux crises this century. And yet the economy adapted, and the market is significantly higher today. We cannot predict nor control what the economy nor market will do. But we can ensure that our investment decisions are guided by our plan, and not the crisis of the day.

©2022 The Behavioral Finance Network. Used with permission.


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