Last week’s stock market swoon reminds that there’s no shortage of worries to distract investors. For some pundits, the rising anxiety appears excessive. The economy still looks healthy in general. One widely read columnist over the weekend noted that consumers are still lining up to buy various luxury goods in his hometown. As a result, the odds of anything more than a mild slowdown look remote, he reasoned.
Yes, the risk of expecting the apocalypse is almost always a poor bet. The world always seems to muddle through even the worst disasters. War, terrorism, high inflation, misguided government policy, and so on are events forever hanging over the economy. Meanwhile, the ebb and flow of capitalism has been known to push markets to excess. Yet life goes on and patience usually pays off in the long run. Such are the virtues of looking past the headlines of the moment and on to the opportunities of the future.
We couldn’t agree more. Strategic-minded investors should maintain perspective and keep emotions in check. But that includes recognizing that a perennially sunny disposition harbors risk too. That includes the recognition that even if the long term works out, which it usually does, the short term can try investors’ souls and push the best-laid plans of mice and men to do unproductive and even self-destructive things.
It’s easy to proclaim allegiance to the long term when markets are rising, as they’ve been doing for the better part of the past five years–at least until last week. But how many of those who champion strategic virtue will hold true to the vision when the hour is darkest?