Starting to Feel Like Things Have Turned the Corner?

It's been a rough ride since the beginning of the year, no? Not just in the markets, but politically too. The Big Orange Guy has seen to that.

It's amazing how many of us respond to these sorts of dust-ups, isn't it? Sure, dust-ups may be minimizing the impact of chaos in government and disaster in the stock market. But seriously, these things are best viewed as dust-ups.

One way to see the truth in this is to think of your own life. What's really important? Okay, so if your 401k was invested all in stocks and it got slammed, maybe you think you won't have enough money to retire 'cause you're due in less than 5 years or so. Fair enough. But really, shouldn't you have thought of this before - that is thought of how you'd feel and what state your finances would be in if the market tanked close to your losing that salary that has paid your bills for some decades?

What, you didn't? Why? Or maybe you did but didn't really let it sink in. You took one of those "risk assessment tests and answered the one about how upset would be you if the market tanked 10%, 20%, 30%, and so forth. You looked at the percentages and figured you knew that the market always bounces back. So why should you care? Or maybe you cared, but you didn't want to admit to yourself that you cared, that you'd possibly get upset, even panic if the market sunk low enough.

After all, you've listened to or watched all those experts explain that markets go up and down. And only amateurs or weaklings let market drops ruffle their feathers. Mature, sophisticated investors know that markets go up and down. And so they don't let the gyrations get them in a tizzy. And you want to be - or at least tink of yourself - as a mature, sophisticated investor, not one of the common run-of-the-mill scared rabbits that sell at the bottom and buy at the top.

But ah yes, the markets do ferret out all the buried feelings that we prefer ignoring. And perhaps you were triggered in recent weeks. So now that things have perked up with those big rocket shots to the moon - including that ginormous 3,000 point explosion in the Dow - you've breathed a sigh of relief. You can bury those nasty, irrational feelings and join the choir that's singing "Happy Days are here again!"

Sure.

On the other hand, you could recognize the folly of these feelings and work on tempering your emotions when it comes to investing - or, frankly, when it comes to anything. Where emotions rule, disaster can't be too far away.

Okay, so none of us is emotionless (or at least the vast majority of us). We all get pushed and pulled from time to time by strong feelings that can overwhelm our rational side. But we can't let that just happen without some attempt to temper it. 

What's with this "tempering"? Well, just consider the definition. After the definition of the noun "temper" that typically refers to an angry state of mind, we find this definition of the verb "temper": improve the hardness or elasticity (steel and other metals); improve consistency or resiliency.

Can you see the value of tempering our emotions.

Now, this tempering is a process. Just as is the case with treating metals, it doesn't happen in a flash, or by magic. Metal has to be heated, then cooled. If you've ever seen a blacksmith at work, you know what this entails. (Blacksmith? What's that?) So like anything worthwhile, you have to apply yourself over time to develop the skill of tempering as a matter of habit. It takes work. It's not easy, especially if you tend to fly off the handle with your emotions. But even those of us who keep extreme emotions in check likely need some tempering.

It's worth the effort. The result may not be a 100% complete conquering of all potentially damaging emotions. But any progress will be worthwhile. And with persistent effort, improvement is sure to follow over time.

Or you could just wallow in the muddy waters of your irrational emotional responses to what's going on around you. Your choice.

Why focus on tempering now? Well, this respite from the bloodletting in stocks may not be a turn, or at least one that lasts more than a few days or weeks - maybe even months. If we're in a Bear Market, the Bear is just taking a snooze before he begins to roam around seeking the destruction of all those holding stocks in abundance - or at least those who will inevitably panic.

So is it just a respite. Well, if you check a chart of the S&P in, let's say, Stockcharts or any other decent charting service, you'll see the bloodletting in stocks was quite violent. And n that picture you'll see that stocks went down too far too fast. And if you bother to learn anything about the action of markets (and just about anything else), when an item goes up or down too far too fast, there's inevitably some sort of correction or at least rest in the action.

Here's a link to the chart at Stockcharts: https://stockcharts.com/sc3/ui/?s=SPY

It even looks like the blood was drained out of stocks, doesn't it?

So now it's time for a transfusion.

The question is, what's next? Who really knows? But if the corner hasn't been turned, there's only one other direction things can go. Whatever it is, tempering your emotions will serve you well.