Last autumn, the worries were in full force: are we nearing a recession, is inflation coming, is this the big market correction, will the trade war escalate, will we have a lasting government shutdown, and many more. Consequently, the market had a big drop in Q4 of last year, bottoming on Dec 24 with a drop of about 20% in 3 months. Ouch.
Then something remarkable happened. The worries all seemed to go away. And just like that, the market has bounced back entirely and is right now butting up against the all-time high levels.
So what happened? Nothing. The worries which existed in Q4 still exist. In actuality these worries plus a myriad of other worries are always present. The worries represent the balance of risk, which is essential in a functioning market.
I remember when I was a 25 year old advisor in 1999 at the peak of the tech bubble (we didn’t know it was a bubble then however) hardly anyone was worried, including myself. “This is the new, connected world….a new economy,” was what everyone was saying. And my least favorite expression of all, which I still hear on the financial news is, “we are in a goldilocks economy.” I know what the talking heads are trying to say; the economy is neither too hot or too cold…just right; but personally I think they should find an example that doesn’t have bears in it. More to my point, in 1999 the worries were gone, but the underlying risks were as high as ever. The second chapter of the Goldilocks should have been published in 2000 with the bears chasing down a terrified Goldilocks and getting even.
The current worry list has some of the same entries as Q4 last year, minus a few that are resolved and plus a few new ones. I’m happy the worries are there. I’m happy the market risk is balanced. I’ll be worried when everyone else is not. I’m not worried about rain while its raining, I’m worried about rain while its sunny.
We’ve enjoyed a 2019 rally (bouncing off the 2018 swoon) and the market is probably due for a breather in the short term. However, I think this will continue to be a good year in the market overall. Instead of looking at the worries, I look at the reality. We have a great economy, everyone who wants a job has one, low inflation, low interest rates, people are spending money, business is expanding, capital expenditures are up, and people are generally happy.
Spring is in the air. In Colorado we are having our first 70 degree days this week. Enjoy this time of year…..and leave the worrying about your money to me!
Matthew Lang is a financial advisor located at 236 N Washington St, Monument, CO 80132. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 719-481-0887 or at email@example.com.