I’ve previously written that many investors perceive market downturns the way people in past centuries perceived solar eclipses: as scary and unpredictable events that were harbingers of very bad things to come. Of course, thanks to our improved understanding of the world, we now know that eclipses are just a phenomenon of nature — and a very predictable and knowable phenomenon at that…and that they don’t have any meaning or long-lasting significance. This has also been historically true of market downturns for those investors with appropriate and well-diversified portfolios. While market downturns are less predictable — both in terms of when they’ll occur and how long they’ll last – it’s worth remembering that they are naturally occurring phenomena in markets and that while unpleasant to sit through, they don’t necessarily portend the end of the economic world as we know it or tell us much, if anything, about what might lie around the corner. Thought this might be worth a reminder in advance of the next market downturn, whenever that may occur.
P.S. No prediction of imminent market doom here. Just thought I’d take advantage of today’s eclipse to mention it since I’ve used the metaphor in several past communications.
P.P.S. While looking at the sun during an eclipse can cause permanent eye damage, I can also attest that looking at a portfolio too much during a market downturn can cause lasting financial damage! (I’ve seen it happen too many times.)