I Might Prefer a Down Market to a Flat Market

The markets have been boring lately. The S&P 500 is practically flat for the last three months and close to equal the value it was 17 months ago. Almost a year and a half of nothing. And while I preach that the stock market should be just one of many variables to determine the health of the your financial status, I am not naive enough to ignore the fact that most people base their financial success on the growth of their assets. So, at a time when regular contributions are the only thing increasing the value of accounts, casual investors are developing a 'ho-hum' attitude towards their portfolios and finances. While most people may think that a flat market is at least better than a down market, I'm not so sure.

There are the numerical reasons a flat market is not advantageous. Without the uptick in the markets no gains are made in an account when there is no increase in value of your assets. Without the down ticks in the market people contributing to their accounts don't get a chance to buy shares on a price dip (the one big benefit of a downmarket). These facts are obvious, but my bigger concern about flat markets is the malaise it may cause investors to fall into. Flat is dull and can make it easy to ignore your finances and lose focus on your focus.

Humans like excitement. It's a possible curse we inherit from our caveman ancestors and the requirement that they face danger head on. We are drawn to extreme sports and entertainment that scratches at our thrill itch. Doctors even prescribe regular periods of exercise foro induce periods of elevated heart rates to increase our health standing. Conversely, non-activity is bad for our health. It can be bad for our financial health as well.

When the market is fluctuation people are paying attention, whether with glee or fear. Research is being done, calls are being made, conversations are being had to determine the best way to take full advantage of the economic situation du jour. Granted, not all action is the correct action, but being proactive to attempt to advance your financial position is better than no action at all.

This is why a flat market, creating a malaise and no call to action, makes me nervous. With nothing encouraging people to pay attention, financial responsibilities get put aside for more interesting subjects. These extracurricular subjects might even be the excuse for non-action. "I want to see how the election pans out....I want to wait for the holidays to be over before I make a decision...I want to see if the thing that may not happen actually happens".

There are many other indicators that people can use to see which way the wind is blowing (I track many of them in these newsletters), but the one that is most often discussed around the water cooler is unquestionably the markets and which direction they are headed. How your portfolio is performing should not be a reason you do or do act on a financial tasks. Unfortunately, for most people it often is.

For your consideration, your own goals and financial concerns should be the sole variable to determine when and how you act on your own financial tasks. Financial indicators are fair tools to help you make a decision, but there isn't a single financial variable that should prevent you from making a decision. Don't wait for the markets to do something interesting before you decide that it is the time to make some important financial move. The markets certainly won't be waiting on you to do something when they decide to start moving again...so you might as well beat them to it.

Blue Sky Financial Group
3478 Buskirk Ave. Suite 1000
Pleasant Hill, CA 94523
925.719.9297
  • LinkedIn
  • Facebook
  • Twitter
Want more information?

© 2020 by Blue Sky Financial Group, All Rights Reserved

ADA Compliance Policy: Blue Sky Financial Group is committed to providing a website that is accessible to the widest possible audience, regardless of circumstance and ability. We aim to adhere as closely as possible to the Web Content Accessibility Guidelines (WCAG 2.0, Level AA), published by the World Wide Web Consortium (W3C). These guidelines explain how to make Web content more accessible for people with disabilities. Conformance with these guidelines will help make the web more user friendly to everyone. Whilst Blue Sky Financial Group strives to adhere to the guidelines and standards for accessibility, it is not always possible to do so in all areas of the website and we are currently working to achieve this. Be aware that due to the dynamic nature of the website, minor issues may occasionally occur as it is updated regularly. We are continually seeking out solutions that will bring all areas of the site up to the same level of overall web accessibility.

If you have any comments and or suggestions relating to improving the accessibility of our site, please don't hesitate to contact our accessibility coordinator, Greg Gorski, at blueskyfinacialgroup@blueskybayarea.com. Your feedback will help with improvements.