Is This Time Different

March 19, 2020

Every time there’s a bear market or a market crash, it’s something that feels different, feels scary, and feels like it’s never going to end. But it will end as history has shown us in my post Through the Lens of Time.

The terrifying feeling that this is something major and it’s something different is natural. This is always the case and shown throughout the history of stock market cycles, in any time frame you look, repeating over and over and over.

With the Coronavirus [COVID-19] in swing at the time of this writing, and becoming a global pandemic, I bet nobody would have expected that it or something like it would be what triggered a bear market so early in 2020. Surprise! But that is true of every bear market which is technically defined as a 20% plus drop.

So about that surprise “bear market”, is it really a surprise? If people did not feel terrified and scared of the future, there would be no panic sell off of the market during bear seasons. If people were not scared and panicky, they wouldn’t be selling off all their stocks. We would be just trucking along no big deal. Currently however, there is a lot of uncertainty, and emotions are elevated hence the bear market because that is exactly what triggers a bear market!

What should I do?

As a convenient starting point it may be well to trace briefly the history of the typical speculative cycle, which runs its course over and over, year after year, with infinite variations but with substantial similarity, on every stock exchange and in every speculative market of the world – and presumably will continue to do so as long as prices are fixed by the competition of buyers and sellers, and as long human beings seek a profit and fear a loss.

From one of my favorite books: Psychology of the Stock Market by George Charles Selden ; Published 1919

That is right, published in 1919 and has stood the test of time for now over 100 years!

Here is an analogy instead of an answer to the question “what should I do now?”, when you have a car the first thing you usually are required to do is provide proof of insurance to obtain a license plate and be legally able to drive on the road. The time to buy insurance was at the beginning, not after you have had an accident. You need to be prepared before an accident happens and if you are not prepared that accident could wipe you out financially. If you were prepared and had say the insurance deductible squirreled away like discussed here in my post Emotional Stability Fund ; during this turbulent time, you may be much happier.

“The key is not to predict the future but to prepare for it.” – Pericles 500 BC

The answer is DO NOTHING with your finances! Changing your plans in the middle of a storm is the worst thing you can do. What most us do through the fear and uncertainty we feel is react. In finances, if you react with fear, you will most likely get burned.

What most of us fail to recognize is the great buying opportunity that exists and most likely will be for the short to medium term. How lucky are the more level headed individuals out there that can fight the fear and step back and take a better look; thinking not in the now, but where the future may lie.

And those young adults that are investing now, just got the gift of a lifetime! Prices are back to where they were in February of 2017, talk about turning back the hands of time. We may even see it much lower than 2017, but only time will tell the story.


Title illustration, created at the Centers for Disease Control and Prevention

Rusty Timepieces Photo by Heather Zabriskie on Unsplash

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