The perils of market watching

The purpose of this article is to warn people about the perils of market watching. In fact, I’m probably guilty of excessive market-watching myself. I have talked about the markets on a regular basis in recent months. But it must be done, for various reasons, while acknowledging the hazards involved.

The reason some market watching must be done is because the phenomenon very much has an impact on all of us. If the markets go down, as they have been in recent weeks and months, the bad news becomes a self-fulfilling prophecy, the markets tumble further, which has a very real impact, not only on current securities valuations, but current outlooks, as well as future investment decisions.

No shortage of bad news

So, if you were to look at the current state of the markets, you might think things are bad, are only going to get worse, and we’re walking right into a recession. That’s why one has to do more than market watch. There are other factors to keep in mind, too.

For example, despite all the recent bad market news — such as Fed interest-rake hikes, bad December stock-market performances, doom-and-gloom economic reports — there is in fact some good news; namely, the U.S. jobs market is still red hot and expected to continue, at least for the near future. A strong jobs market is medicine that can prevent the sickness of a recession. Remember, a recession will occur. We just don’t know when. And it might not be right around the corner, as so many are speculating.

Playing the long game

Which also brings up another point I’ve been trying to emphasize on these pages. The market will go up. It will go down. We will have a recession — at some point — we will have a recovery from a recession — at some point. These are all part of the natural cycle of financial activity and investing.

But we need to keep in mind two things. First, don’t panic. A recession will eventually happen, and nobody knows exactly when. Second, a long-term approach to investing means taking into account multiple recessions over multiple years as part of the natural cycle of the markets. If your long-term approach is sound, then the short-term news cycle is just noise.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

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