It’s always a bad time to invest

URGH! It always seems like a bad time to invest!” exclaimed our resident investor, Bob.

Canadian stock markets have lagged behind their American counterparts, where equity markets are experiencing a period of buoyancy. The S&P 500, Dow, and Nasdaq have all recently achieved record highs. 

Hence, for Bob, this raises the question of whether it’s wise to invest his ‘new money’ when stock prices are elevated. There are both financial and emotional considerations at play when we start to take the stance that “it’s a bad time to invest”—like Bob. 

Bob might also argue: “Stocks are making new lows, it must be a bad time to invest!

Well, that is true! (or could be). But let me guess:  just eight months ago in October, like Bob, you also caught yourself saying, “Stocks are making new lows; it must be a bad time to invest.” 

But, there is a psychological mechanism at play here, allow me to explain:

Your incentive structure often shapes your worldview. If you are in a period of wealth conservation, which roughly half of our clients are, then you are wired to see and hear risk when you look out into the world. If you are in a period of growth, then you might see opportunity in the chaos. Regardless of where you would fall, you are right. 

That isn’t all; sometimes Bob finds himself thinking, “Wall Street is greedy! I do not want to participate in that.” 

Well, my good friend Bob – I invite you to step out of the idea that “Wall Street” is or isn’t greedy and simply observe why we, as investors or as consumers, think this about some idea or group of people that appear to us to be “Wall Street.”

Where did we get that idea? Who is Wall Street, and why do we have this conception that a chart moving up and to the right correlates to greed? Do not get me wrong, I deeply believe the humans who live on any street to be motivated by the cycles of fear and greed. We are human, but why do we connect that idea to the greed of a certain group of people to mean we should not buy investments in companies building a better future? 

Truer than the age-old idea of “buy low, sell high” is the idea of cycles of greed and fear. There is actually even a Greed/Fear Index ( out there if you’re curious about where we stand today (as of June 6th, 2024, it’s neutral). You’d be correct in assuming that periods of greed are followed by cycles of fear.

Core to the idea of working with an advisor such as myself is to help you figure out when you should be greedy (usually when others are fearful) and when you should be fearful (usually when others are greedy). But of course, it’s not that simple. 

OK! So Wall Street is greedy and I shouldn’t buy in at the top, then, right?

 While intuitive,  the notion of waiting for a market downturn to invest might not be the most advantageous strategy. Historically, North American equities have had a consistent upward trajectory over the past century, with some bull markets spanning decades due to the self-reinforcing nature of rising stocks and a thriving economy. 

Delaying investment until a crash could mean missing out on substantial returns. For example, had one hesitated to invest in 1980 due to perceived market overvaluation and waited for the subsequent bear market, they would have missed seven years of growth, including approximately 117% in returns. Furthermore, that downturn proved to be a brief interruption in a remarkable 20-year bull market that saw the S&P 500 surge over 1,000%. 

Now, here’s Bob again, “The world seems to be a bit of a disaster, I don’t think I should invest now.” 

The world is always in flux. Simultaneously, there are periods of extreme abundance in some parts of the world and extreme violence and poverty in other parts of the world. The remarkable part about markets, humans, and nature alike is this: we keep moving forward, evolving, and improving. 

The chart below maps economic policy uncertainty (EPU) and geopolitical risk (GPR), which are two measures of uncertainty economically and geopolitically. 

As you can see, neither of those lines is ever at zero, which implies there is always risk. However, at the same time, the S&P 500 has increased in value by 848.82% since 1997, and more importantly, I would say that as a civilization, we have taken significant strides forward. 

To all Bobs out there, the medium is the message, and the medium is fear-mongering…

Whether it’s traditional TV, the news, social media, or any other media outlet—literally all of them are incentivized not to share actual information about how things are, but rather to inflict emotion in you to make you compelled about how things feel. 

Sadly, in the short term, no emotion can hold your attention better than fear. These mediums are designed to hold your attention, which means passing on a sense of fear, which leads to a distorted worldview of how things actually are versus how they ‘feel.’ 

Of course, the world is risky, but…

My job as a money manager is to earn a return, over generally a long period. To separate signals from noise and understand how money can work for you over the long term, both in a mechanical and psychological sense. Return and risk are eternally intertwined, so earning a return means taking some risk. 

The story of fear is not a new one. As a consumer or even just a citizen in our modern world, you are constantly bombarded with visual and auditory stimuli aimed at invoking an emotional response from you. Two of the most common are a sense of lack or a sense of fear. From your perspective, these emotions are not totally useful, but from an economic standpoint, they are profitable. 

Rather than disconnect from the world, I implore you to participate in it. Rather than being a victim of capitalism, I challenge you to take responsibility for it, and become an owner in a philosophical sense and in a practical sense. 

Embrace the inherent risk there is in this world and see the opportunity. If that feels like a lot—especially when it pertains to the world of stock markets and investing, it is a lot. I and the rest of the team at Leede Jones Gable spend most of our days trying to navigate and manage that world for our clients and ourselves successfully and ethically. 

At the end of the day, this is one of our core functions: to assess, manage, and deploy risk effectively. To navigate what types of fear we should, well, fear. To separate signals from noise to be able to make decisions, take calculated risks, and see the big picture on behalf of our clients. This is our job, our duty, our passion, and in reality, it is one of the great passions of my life. 

The best time to invest was 20 years ago, but the second-best time to invest is today. 

The comments and opinions expressed herein reflect the personal views of Joss Biggins. They may differ from the opinions of Leede Jones Gable Inc. and should not be considered representative of the research beliefs, opinions, or recommendations of Leede Jones Gable Inc. View our full legal 
disclaimer here.

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