Those who know me would laugh at me writing this article. By nature, I’m a worrier, I have anxieties and I tend to be a “what could go wrong?” sort of person vs. “what could go right?”. In some ways that makes my career choice a curious one, though, because I have to fight against that all the time. Even in positive markets, I get notes from clients regularly that suggest their unease about any number of things; government spending, the debt, the status of the U.S Dollar as the world’s currency, the upcoming election, inflation, etc. I can’t minimize these concerns for clients because they are real to them.
I believe last year was one of the better years for our clients' portfolios in my 33 years of experience in the financial services industry, but a lot of people don’t feel it.
This is an election year, so it’s only a matter of time before we start to get those notes with people with fears about what might happen – and they come from both sides.
One of the lessons of course is to lengthen your time frame, and I’ll write about that in another article. But another one is that no matter what current circumstances are, it’s so much easier to be pessimistic than it is optimistic. We are fed pessimism from all directions – social media, the news, our families and friends, what we read. Pessimism sells and gets eyeballs. It’s no coincidence that media outlets get the best ratings when there is a negative world event or a market crash. But here’s the thing - pessimism doesn’t make you money over the long run.
Outside of our money we all need optimism in order to feel good about our futures. I believe young clients have grown increasingly pessimistic in recent years, and it’s one reason they are opting for experiences in their present vs. saving for their future. A young person needs to feel that their future will be better than today if they are going to sacrifice the present and save for it. Our older clients approaching retirement or in early retirement need to feel optimistic that they still have a purpose, something to contribute, something to look forward to.
Regarding investments, there have always been reasons to be pessimistic about the future and about markets. Wars, bombings, oil prices, recessions, housing markets, Great Financial Crisis, dot com bubble bursting, elections, Covid, the list goes on. And yet if your time frame is more than 30 seconds, (kidding) investing and staying invested has almost always been the right move in a game based on probabilities.
Most clients are long term investors, even in retirement. A client who is 65 is most likely still planning for 30 years. I started in 1991 and the Dow Jones Industrial Average (DJIA) average closing price was 2,929.04. All of those events I refer to above happened in the last 33 years and at the end of 2023 the DJIA closed at 37,689.54. That’s 12.87 times, and what that means is assuming you had $100,000 invested in the Dow Jones index in 1991 and left it there through all of those negatives, you’d have nearly $1.3 million. ( 1)
As in the rest of life, there are always things to be concerned with or fearful about in the present. But in order to find happiness and success it pays to try to limit the impact that social media or the news or other sources of negativity have on your outlook. Pessimism gets the eyeballs and clicks, but in the end, optimism always wins.
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