After the Storm
When I arrived home from my bike ride yesterday, my wife inquired: “Did you avoid the raindrops”? Cold, wet, and tired, I had a one word reply: “Hardly”. I thought again and added, “but at least I have an idea for my next blog”.
Riding a bicycle in a rainstorm is not fun, not in any way at all. You are being pelted with rain. Your glasses are smeared with water and road dirt so your vision is impaired. The road is slippery, and every stripe in the road holds the potential to wipe you out. Your normal speed regulator, your brakes, does not work well. Sometimes the brakes won’t even work at all. Cars ride by you and splash more water on you. Trust me, riding in the rain is not fun.
But I have ridden in the rain before, and I am sure I will get caught out in the rain again. As a cyclist, you develop the skills to handle the risks of riding in the rain. And even yesterday, the exercise was good for me, both physically and mentally. And the more experience I have riding in inclement weather, the better I will be at handling the dangers that arise.
Being an investor in a BEAR MARKET is very much like riding in the rain. It is dangerous. Risks are heightened. Certain guiding principles appear to fail. You may even question your safety net, i.e. cash cushion. Do I really have enough? In a bear market, your determination to be a long term investor can be challenged by the declines in your account balances. Bear markets are no fun. Period.
I was watching the market news the other day at lunchtime. A portfolio manager was being interviewed. Earlier in his career he was a fighter pilot. He offered this comment: “the first thing we are taught when trouble hits, keep flying the plane”. His comment makes great sense, and is good advice for riding a bicycle in the rain AND being an investor in a bear market.
We have experienced bear markets before. They are caused by very different events each time. The unpredictable nature of bear markets is a common theme. How could anyone predict THIS? But, bear markets end. The storm will subside. The danger will lessen. We need to keep riding, or keep flying the plane, or keep focused on our long term financial objectives -- the reason why we invest.
Yesterday, a few miles from home, the rainstorm ended. The sun came out and a brilliant rainbow appeared in the sky. It was large and lovely and I was riding straight towards it. I saw a few people and hollered, “check out the rainbow”. They looked up and smiled. Further down the road, I saw a couple of young boys who were stopped and looking up at the rainbow. A bit further, a couple was standing in the middle of the street doing the same thing. I whizzed by and we smiled at one another. The storm had ended, and we were sharing a beautiful wonder of nature.
Ralph McDevitt April 9, 2020
Any opinions are those of Ralph McDevitt and not necessarily those of Raymond James.
Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Past performance may not be indicative of future results. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Investors should consult their investment professional prior to making an investment decision. Expressions of opinion are as of this date and are subject to change without notice.
