In my last blog, I talked about the challenge I had booking a vacation because of its cost and my nerves around spending the money. Well, I’m happy to report that I booked that vacation and am just returning from a glorious week in the Turks & Caicos. Worth every penny!
But boy, did I pick a heck of a week to be gone. In a mere 7 days, our 45th President was inaugurated, millions of men and women around the world marched in protest and the Dow Jones broke the 20,000 mark for the first time. In President Trump’s first days in office he withdrew from the TransPacific Partnership trade deal, made way for the Dakota Access and Keystone XL pipelines to progress, engaged in a Twitter feud with Mexican President Enrique Peña, floated the idea of a 20% tax on Mexican imports to pay for the border wall, temporarily banned immigrants from multiple countries inciting another round of protests and implemented an executive order on regulations that requires two to be cut for every new one that is passed. You know, just your typical slow news week.
The country is divided over how we feel about these events. Whether you are feeling dismayed or hopeful, it’s nearly impossible not to feel strongly when so many impactful events are occurring in such a short time. Unless you are out of the country and intentionally disconnected from your phone, tablet, computer and television like I was there’s almost no escaping those feelings. You can’t even watch the SAG awards without being reminded of what’s going on in our country.
We don’t like so much stimulation. Our internal system craves stability, calm and predictability. To find peace amongst all the content and amidst all the emotion, we try to answer two questions: What does this mean and what do I do about it? It’s hard-wired in our brain to answer these questions and the faster the better. What am I dealing with? A saber-toothed tiger. What do I do? Run.
We know what to do in most crises. As soon as we identify it, we do something. If I’m on fire, I stop, drop and roll. If there’s a tornado, I go to the basement in a room with no windows. If there’s an emergency, I call 911. Whether it’s fight or flight when something big happens our natural, instinctual next step is to take action.
It’s not that simple right now. Just identifying whether we are actually in a crisis is much more difficult. Some of us conclude President Trump’s unconventional approach and decisiveness is exactly what we need to address our challenges. Others of us conclude he is systematically dismantling everything our country stands for. Some of us think the Dow crossing 20,000 is the beginning of a rally spurred on by a pro-business, anti-regulation, anti-free-trade administration. Others think we’ve topped out and this is the pride before the fall. So, are we in crisis or not?
The alarm bells of crisis aren’t even as reliable as they once were. Our news is as divided on whether things are good or bad as we are. They lead us to believe everything is breaking news worthy of our immediate and undivided attention. And with so much unverified information out there, it’s hard to figure out what’s real and what isn’t.
With such little certainty in the equation, coming to an accurate answer about what to do in response is tough. If we knew what a 20,000 point Dow really meant, it would be easy to decide whether to get into or out of the market. We could assess the situation and act accordingly. Of course, we don’t know what it means or what the market will do in the short term. We never do.
In that uncertainty, we have a choice. We can tell ourselves we know what current events mean for certain. We can tell ourselves we’ve come up with a way to infer what’s to come from what’s happening now. We can do what feels good in the moment and act on that ‘knowledge’. Or we can do the more difficult, less immediately satisfying thing which is to tolerate uncertainty and resist overreaction. We can stick with a disciplined investment portfolio that capitalizes on opportunities created from the overreaction of others.
It feels like doing nothing. It feels like ignoring our instincts. Sometimes it just plain feels bad which is why everyone doesn’t do it. Long-term investors will face a never-ending series of short-term uncertainty not unlike what we’re going through now. It’s what we do – or don’t do – in response to that uncertainty that will ultimately determine what our future holds.