Has this happened to you? On Wednesday, February 15, I caught my first cold in a long time. I cannot remember getting one since before the pandemic started. Five days later, I am almost back to normal, but I seem to have “shared” it with my wife. The experience highlighted several similarities with bear markets or down markets in general. Nervous clients might understand the parallels.
1. I have not had one for a long time. Wasn’t I immune? The reason I haven’t had one for years is because those years were spent in enforced isolation as we worked from home, wore masks and kept our distance from other people. They were wearing masks too. When you add in two Covid vaccine shots, three boosters and a sudden appreciation of flu shots, I thought I was protected.
Down markets: We can still remember the longest bull market in history, running from 2009 into 2020. It is easy for investors to forget the stock market can go down too.
2. There is no cure for the common cold. We have done a pretty good job keeping up with Covid and its mutations. We have probably all gotten similar boosters. The common cold may have been around for 200 years. According to the Mayo Clinic, there is no cure. We deal with it.
Down markets: Because markets move in cycles, there will always be down markets. Put another way, if the stock market has historically returned about 10% annually when measured across decades, if it has a string of much better years, it needs a few less good years to bring returns back into line.
3. It’s a cold. It wasn’t Covid. At my wife’s suggestion, I took a home Covid test on the first day. Thankfully, it came back negative. It was simply a cold.
Down markets: There is no asteroid on a collision course with Earth. There is no intergalactic group of alien creatures attempting to invade. There is no alarming science fiction reason why the market is going down.
4. Day 1: Was it simply a sore throat? I was optimistic. Maybe I wore myself down over the past weekend. If I took care of myself, dressed warmly, stayed indoors and avoided alcohol, maybe I would be better the next day. All those antibodies inside me will fight off the germs.
Down markets: We optimistically hope for a soft landing. This market decline will be like a bad dream. Hopefully we bounce back quickly.
5. It gets worse before it gets better. Day two brought the runny nose, persistent coughing and a really sore throat. This meant lots of tea, staying in bed, sleeping and reading.
Down markets: Factors like stubborn inflation and increasing interest rates keep the markets from going up. The trend is definitely down. This won’t be over soon.
6. This time it’s different. What if I do not have a cold? What if it is more serious? Have you ever counted the number of drug ads on TV? Have you listened to the listing of side effects? Several of these serious illnesses seem to list the symptoms of the common cold as side effects. “Feeling unwell” was my favorite example.
Down markets: Everyone seems to have a friend who predicts “This is the big one.” The folks on the TV news always seem to find a gloomy person when they need one. It is “funny” if the market turns around the next day and closes up, the gloomy person isn’t brought back to explain why they were wrong.
7. You take remedies. There are over-the-counter drugs that can help make you functional or reduce the symptoms. These help, but they fade and you fade. Maybe you take them again.
Down markets: The stock market rarely goes straight down. (That’s a crash.) It has down days and up days, but the overall trend tends to be down. The market has to get the virus out of its system, just like the human body.
8. Rest is best. The body is good at repairing itself. If you stay off your feet, bundle up, stay warm, keep hydrated and stay fed with things like chicken soup or other remedies, the body does battle with the virus.
Down markets: Hopefully the investor uses money managers. Let them worry about buying and selling. Pay attention to your advisor’s recommendations on topics like rebalancing.
9. Your to do list goes out the window. No exercise bike for about six days. My body said. “I need rest.” I devoted time to manageable projects like keeping current with e-mail and LinkedIn.
Down markets: Those manageable projects include sticking to scheduled monthly dollar cost averaging contributions and taking calls from your advisor.
10. Friends tell you everyone is catching colds. I thought I might be the only one. You gradually get the word “it’s what’s going around.”
Down markets: It’s not like you chose bad managers. Everyone is feeling the pain.
11. You gradually get better. Day two was about the same as day one. By day three, I realized I was on the road to recovery. On day four, I was becoming functional again, but still under the weather. I would wear a mask if we went outside.
Down markets: The statistics start to improve. Earnings are showing some bright spots. Inflation slows. The Fed moderated it’s increases. You feel there is light at the end of the tunnel. The stock market is supposed to be a forward looking indicator, giving a picture of what the economy might look like in the future.
12. Your friend got a cold. They think it’s the worst they have ever had. They cannot remember ever feeling this bad before. They are sure it’s the worst cold ever. Maybe it’s not even a cold, but something worse. I (or you) can tell them it’s something that’s going around. I got better after about five days. They should be fine too.
Down markets: You have a friend who is seeing a down market for the first time. As an experienced advisor, you share details of down markets you have experienced before. In those cases, things did not turn out as badly as some people thought.
One final thought: They say the way you get rid of a cold is to give it to someone else. Unfortunately, I passed it on to my wife! Now she has it!
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book Captivating the Wealthy Investor is available on Amazon.