When markets drop, anxiety increases. It’s normal human behavior.
I’ve written before about how gut instincts and rapid reflexes – behavioral factors – can do you in as an otherwise sensible investor. The other day, I was reminded that, in other walks of life, those instincts aren’t such a bad idea. Like if you encounter a real, live rattlesnake.
I was chatting with a colleague recently who relayed the following story: a mutual friend who is retired had to cancel plans for a social get together. It seems the friend’s husband was frantic about something Jim Cramer had said about the financial markets on CNBC and was demanding an immediate meeting with their broker to adjust their portfolio.
“What did the market do today?”
“How about that market?”
“That market is really something, eh?”
There are a lot of headlines about interest rates rising and many will say something along the lines of “Highest rates since 2020!” or “Rates Jump to Highest Levels; Mortgage Rates Climbing!” Couple those headlines with the fact that the 10-year bond yield just moved up to 2%, a somewhat psychological level. There are fears that rates will rise even further and so fast that the economy will slow dramatically at time when it still is somewhat on edge. Adding those to the headline inflation numbers and there is a fair amount of angst.
We all know the years 2020 and 2021 have been a period for the record books. May you live in interesting times, as the saying goes.
For many months, the recurring theme in the news has been the economy: when will we experience a recession or bear market and how bad will the downturn be? Unfortunately, the economic commentary has, more than ever it seems, become infused with politics.
Control What You Can Control: Minimize Your Vulnerabilities
“…I think of as a mathematical equation…Threats x Vulnerabilities = Risk.”
― Stanley McChrystal, Retired United States Army General1