Market Analysis

Hanging Tough…Over and Out!

Many worry today's market volatility is because the world's more perilous than ever. Truth is, there's never a dull moment. Hang tough!

Story Highlights:

  • Many believe today's market volatility is because the world's more perilous than ever.
  • While investors worry about much-publicized uncertainties and fears, stock markets discount all widely discussed and disseminated information.
  • Sentiment can cause short-term market moves in either direction, but fundamentals ultimately determine long-term values.
  • Investing is about appreciating what others do not, recognizing what's already priced in, and then having the discipline to hang tough.

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Chances are you've heard (or felt, or thought) stock markets are volatile right now. Each day brings new media headlines of market dips, gains, rises, retreats, losses, slips and slides. The only certainty is the seemingly uncertain direction of markets. And why not? Sentiment drives short-term market moves, and today (if you believe current media hype) we're dealing with a "great unraveling" of the very fabric of our society and economy.

Everything Seemingly Is Spinning Out of Control
By Alan Fram and Eileen Putman, Associated Press

My goodness! Let's head for the storm cellar and right quick! This article touches on everything from adrift polar bears to corrupt basketball refs to video stores going by the wayside. It's a more perilous world than ever!

Or not.

It's time to hang tough.

Why, in this manifesto of panic, is the writers' strike included but not the financial turmoil or the credit "crisis"? This smorgasbord of panic-inducing items is chosen somewhat haphazardly, but at the very least, it's apparent the aim is to alarm. It's virtually screaming, "YOU SHOULD BE FRIGHTENED!" In between the more breathless details, a truth emerges: There's plenty of uncertainty and fear today. All the more reason to hang tough.

Uncertainty is the foe of investors, but not of stocks. Why? While investors worry about much-publicized uncertainties and fears, stock markets discount all widely discussed and disseminated information. So once a story is known, it's "priced in." No more power to move markets! That means you can ignore 95% of what's reported. Inflation concerns? Already widely known and held. Same with recession fears, housing, banks' health…the whole menu. Unless you can find something fundamental to worry about that's not already widely worried about, you've got very little to fret ABOUT.

Sentiment can cause short-term market moves in either direction (which can be very uncomfortable to endure), but fundamentals ultimately determine long-term values. Fact is, we're always worried about something. It always seems like we're at the precipice of demise, of Armageddon, of impending doom and at world's end. In 2007, it was the mortgage crisis; in 2006, unraveling yen carry trades; 2005, Katrina; 2004, bird flu; 2003, impending war and on and on and on—yet we, and stocks, survived. If you're looking for certainty, then stock investing (and probably investing in general) isn't for you. Investing is for those who can hang tough.

It's the rare times when folks are complacent, when they think stocks are the right place to be and tend to ignore or diminish real problems that cause longer-term stock price destruction. It's not about being contrarian per se; it's about appreciating what others do not, recognizing what's already priced in, and then having the discipline to hang tough when others bite their nails in fear.

Even George Carlin (R.I.P.), who had plenty of ups and downs and showcased cynicism in his bones, often had underlying words of optimism. In his honor, perhaps befitting today's uncertain and trying times, he reminds everyone the world's always moving forward and most importantly, to hang tough:

"I take it slow, I go with the flow, I ride with the tide. I've got glide in my stride. Drivin' and movin', sailin' and spinin', jivin' and groovin', wailin' and winnin'. I don't snooze, so I don't lose. I keep the pedal to the metal and the rubber on the road. I party hearty and lunch time is crunch time. I'm hanging in, there ain't no doubt. And I'm hanging tough, over and out!"

- George Carlin
"I'm a Modern Man"
Beacon Theater, NYC
November 5th, 2005

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.