“The stock market hates uncertainty” is one of the more trite phrases in the financial lexicon. That doesn’t mean it’s not true.
Certainty can never be found in the markets, but reasonable people might agree that there is more for investors to consider at this very moment than there was say in April of last year.
Between the election, the rising number of Covid cases, and companies pulling their forecasts in earnings calls, there is a lot for investors to juggle. As a result of all this, and other unknown factors, the stock market is experiencing its worst week since March.
To which I say, who cares?
I’ll tell you who cares; Day traders, market makers, and journalists, to name a few. Who shouldn’t care? Everyone else. Let me clarify who I mean by “everyone else.” I’m talking about people who don’t view the stock market as a form of entertainment.
I don’t mean to be cavalier, or to say you’re not allowed to feel a bit nervous, heck, I feel it. When I say who cares, I’m specifically referring to the gyrations of the market over a short period of time. You know what you signed up for. Remember March?
The only reason we put our hard-earned money on the line is to secure financial freedom. That’s it. And if a 6% drop in one week is impacting your ability to live the life you want to live, then you’re taking too much risk. Maybe you’re not worried about this 6%, but you’re worried about the next move lower. In which case, I repeat, then you’re taking too much risk.
The stock market hates uncertainty. You should love it. Uncertainty amplifies risk, and risk plants the seeds for future reward, eventually, most of the time (Japan, etc).
Now, if you think you can navigate the ups and the downs of the market, then by all means go for it. But for the rest of us, it’s critical to remember that we have to pass through storms in order to get to the blue skies. Right now the markets are dark and stormy, but blue skies are ahead.